Arab Today, arab today lebanon’s 10year debt to help banks
Last Updated : GMT 21:36:03
Arab Today, arab today
Arab Today, arab today

Lebanon’s 10-year debt to help banks

Arab Today, arab today

Arab Today, arab today Lebanon’s 10-year debt to help banks

Beirut - Arabstoday

Lebanon sold its first 10-year currency debt this week, giving banks access to higher-yielding securities, enabling them to raise deposit rates from the lowest since 1979 to attract customers. The Arab nation will pay an 8.24 percent coupon on the LL 1.15 trillion ($765 million) of notes it sold, the highest rate paid on domestic debt since July 2009. Egypt, which like Lebanon holds Standard & Poor’s non-investment-grade B rating, sold 10-year local currency debt at 16.33 percent at its last auction. Banks in the Arab world’s most indebted nation rely on deposits from Lebanese nationals abroad to enable them to buy government debt, as the country struggles to reduce its budget deficit. Lenders had cut interest rates on local-currency deposits as the government slashed yields offered at bi-weekly debt auctions. The average deposit rate fell to 5.42 percent in April, the lowest since December 1979, before climbing to 5.45 percent in July, central bank data show. “This 10-year issue at a high rate can help first ease the pressure on interest margins and support the deposit rates in Lebanon,” Marwan S. Barakat, the chief economist and head of research at Banque Audi SAL-Audi Saradar Group, said by phone Wednesday. “The drop in deposit rates has meant that we’ve lost some competitiveness in the market.” Lebanon’s total debt amounted to 134 percent of gross domestic product in 2011 and the nation’s budget deficit is expected to be little changed at 6.6 percent of GDP, Finance Minister Mohammad Safadi said in May. Local lenders hold about 75 percent of the nation’s debt, Central Bank Governor Riad Salameh said Tuesday. Salameh banned banks from buying non-Lebanese risky assets including non-investment-grade paper and derivatives in 2004, allowing the government to lower its borrowing costs. The coupon on five-year local currency debt declined to 6.18 percent in October 2010 from 11.5 percent in October 2007. The 10-year local-debt offering “was a really hot sale because we’re looking for yield, and short-term paper isn’t paying very much,” said Ray Majdalani, a Beirut-based fixed-income trader at First National Bank. The yield on local-currency government debt rose 50 basis points in March, in line with an International Monetary Fund recommendation that higher rates would help spur bank demand for the securities. The yield on five-year notes now stands at 6.74 percent. Non-resident deposits in Lebanese lira have risen 16 percent so far this year at commercial banks after falling 7 percent in 2011, central bank data show. The deposits rose 22 percent in 2010, and 161 percent in 2009. The Economist Intelligence Unit said this month it had changed its outlook on Lebanese banks to negative, “to reflect the deteriorating economic picture. Banks’ dependence on foreign depositors and on the sovereign’s debt-servicing capacity is a long-term vulnerability.” The nation’s credit risk is the second-highest in the Middle East after Iraq, according to data provider CMA. Lebanon’s economic growth estimate for the year is between 2 percent and “less than 3 percent,” Salameh said, falling short of the IMF’s forecast of 3 percent. Trade and tourism have been affected by the “political and security environment in the area and its impact on Lebanon,” Salameh said. Tourism is Lebanon’s largest foreign-exchange earner. Still, the central bank’s foreign reserves are at a record $35 billion as demand to hold Lebanese debt grows, Salameh said. Banks are confident in the local currency, “and the dollar is being sold to buy” lira, he said. “That’s why the 10-year offering was successful.” Confidence in the nation’s currency is stable even after deadly clashes in the northern city of Tripoli between supporters and opponents of Syrian President Bashar Assad. Lebanon, whose currency has been pegged to the dollar at about 1,500 since 1993, has seen deposits rise at an annualized rate of 7 percent this year, Salameh said. “The central bank wants to keep liquidity of Lebanese pounds under control,” said Gaith Mansour, head of capital markets at Credit Libanais SAL Wednesday. The central bank and the Ministry of Finance completed a $2 billion debt swap earlier this year to shore up confidence in the currency and keep interest rates stable. The ministry exchanged local-currency treasury bills held by the Banque du Liban for dollar-denominated bonds. Another $1 billion debt swap is “supposed to happen by year-end,” Salameh said. “Lebanon’s currency has been stable for the past twenty years,” Audi’s Barakat said. “With foreign reserves at a record high, more than 85 percent of all Lebanese pounds in the market are covered, which means the central bank is very well placed to defend the currency if it needs to.”  

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today lebanon’s 10year debt to help banks Arab Today, arab today lebanon’s 10year debt to help banks

 



Arab Today, arab today
Arab Today, arab today Mohamed Bahari prepares new collection for spring 2017

GMT 06:15 2017 Monday ,27 February

Mohamed Bahari prepares new collection for spring 2017
Arab Today, arab today 17.4 million tourists visit UAE in 2016

GMT 00:47 2017 Monday ,27 February

17.4 million tourists visit UAE in 2016
Arab Today, arab today Sheds light on major steps in 12-year career

GMT 06:07 2017 Monday ,27 February

Sheds light on major steps in 12-year career
Arab Today, arab today UN envoy sets out framework

GMT 07:25 2017 Monday ,27 February

UN envoy sets out framework
Arab Today, arab today Ayat Abaza says state TV presented major stars

GMT 03:52 2017 Sunday ,26 February

Ayat Abaza says state TV presented major stars
View News in Arabic - Business: مصارف
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Penguins in the age of dinos

GMT 11:44 2017 Saturday ,25 February

Penguins in the age of dinos
Arab Today, arab today Pluto's unruly moons

GMT 06:31 2015 Thursday ,04 June

Pluto's unruly moons
Arab Today, arab today 'Constructive' Vauxhall talk with union

GMT 08:54 2017 Saturday ,25 February

'Constructive' Vauxhall talk with union
Arab Today, arab today Tesla back into red but revenue grows

GMT 07:27 2017 Thursday ,23 February

Tesla back into red but revenue grows
Arab Today, arab today Reasons for the delay 'On the Stairs of Servants'

GMT 06:42 2017 Saturday ,25 February

Reasons for the delay 'On the Stairs of Servants'
Arab Today, arab today Ex-yoga missionary unleashes rage

GMT 12:16 2017 Thursday ,23 February

Ex-yoga missionary unleashes rage

GMT 07:23 2017 Friday ,24 February

Ola Ghanem hopes to work with M.Ramadan

GMT 05:14 2017 Thursday ,23 February

UK appoints 1st Scotland Yard chief in 188 years

GMT 18:23 2017 Friday ,24 February

Fadi explains secrets of  Nancy Ajram's newlook

GMT 10:28 2017 Wednesday ,22 February

Milan laughs while Rome cries

GMT 19:45 2017 Monday ,20 February

Sarah Belamesh designs antiques of "ceramic"

GMT 10:51 2017 Saturday ,25 February

Pigs with edited genes show resistance

GMT 14:04 2017 Friday ,24 February

Messi visit will contribute in tourism

GMT 13:12 2015 Saturday ,09 May

Sheikh Sultan opens Sharjah Centre

GMT 22:42 2017 Thursday ,23 February

Nasima Gamei revives heritage in jewelries
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday