PHOTO
BEIRUT - Leading international investment bank Goldman Sachs said in its recent report that Lebanon’s Eurobonds are undervalued.
Byblos Bank’s Lebanon this Week, which published the report, said the investment bank uses a model that estimates which sovereign bonds are “undervalued,” “fair” or “expensive” by comparing the difference between the actual spreads and its model-implied spreads. “Undervalued” means investors may be getting a good deal because the value of the instrument may appreciate.
For three- to seven-year Eurobonds, “the difference between the actual spread of 517 basis points (bps) on Lebanon’s Eurobonds and the Goldman Sachs’ model-implied spread of 221 bps shows that the undervaluation is at 296 bps. The model-implied valuation metric is based on the current level of investors’ risk appetite, as well as on the current and expected future path of macroeconomic fundamentals in emerging markets,” Byblos Bank said.
According to Goldman Sachs, “Lebanese Eurobonds with three- to seven-year maturities are the only ‘undervalued’ bonds among 19 ‘B’-rated sovereigns included in Goldman Sachs’ universe.”
“The investment bank noted that the actual spread on Lebanese Eurobonds is the widest across the 56 emerging markets with Eurobonds that have maturities of three to seven years. In comparison, the investment bank considered as ‘undervalued’ the Eurobonds of nine sovereigns in other rating categories. They consist of one ‘AA’-rated country, two ‘A’-rated sovereigns and six ‘BB’-rated countries,” Byblos explained.
“Goldman Sachs classified Lebanon’s Eurobonds that have a maturity of seven to 12 years as ‘undervalued.’ The difference between the actual spread of 523 bps on Lebanon’s Eurobonds and the Goldman Sachs’ model-implied spread of 284 bps shows that the undervaluation is at 239 bps,” the report said. It added that Lebanon’s long-term Eurobonds were the only undervalued bonds among 20 B-rated sovereigns with these maturities.
“The investment bank indicated that the actual spread on long-term Lebanese Eurobonds constituted the third widest spread across the 20 B-rated countries and among 47 emerging markets with Eurobonds that have maturities of seven to 12 years,” Byblos said.
Goldman Sachs also classified Lebanese Eurobonds that have a maturity of 12 years or more as “undervalued.”
Copyright © 2017, The Daily Star. All rights reserved. Provided by SyndiGate Media Inc. (Syndigate.info).
Byblos Bank’s Lebanon this Week, which published the report, said the investment bank uses a model that estimates which sovereign bonds are “undervalued,” “fair” or “expensive” by comparing the difference between the actual spreads and its model-implied spreads. “Undervalued” means investors may be getting a good deal because the value of the instrument may appreciate.
For three- to seven-year Eurobonds, “the difference between the actual spread of 517 basis points (bps) on Lebanon’s Eurobonds and the Goldman Sachs’ model-implied spread of 221 bps shows that the undervaluation is at 296 bps. The model-implied valuation metric is based on the current level of investors’ risk appetite, as well as on the current and expected future path of macroeconomic fundamentals in emerging markets,” Byblos Bank said.
According to Goldman Sachs, “Lebanese Eurobonds with three- to seven-year maturities are the only ‘undervalued’ bonds among 19 ‘B’-rated sovereigns included in Goldman Sachs’ universe.”
“The investment bank noted that the actual spread on Lebanese Eurobonds is the widest across the 56 emerging markets with Eurobonds that have maturities of three to seven years. In comparison, the investment bank considered as ‘undervalued’ the Eurobonds of nine sovereigns in other rating categories. They consist of one ‘AA’-rated country, two ‘A’-rated sovereigns and six ‘BB’-rated countries,” Byblos explained.
“Goldman Sachs classified Lebanon’s Eurobonds that have a maturity of seven to 12 years as ‘undervalued.’ The difference between the actual spread of 523 bps on Lebanon’s Eurobonds and the Goldman Sachs’ model-implied spread of 284 bps shows that the undervaluation is at 239 bps,” the report said. It added that Lebanon’s long-term Eurobonds were the only undervalued bonds among 20 B-rated sovereigns with these maturities.
“The investment bank indicated that the actual spread on long-term Lebanese Eurobonds constituted the third widest spread across the 20 B-rated countries and among 47 emerging markets with Eurobonds that have maturities of seven to 12 years,” Byblos said.
Goldman Sachs also classified Lebanese Eurobonds that have a maturity of 12 years or more as “undervalued.”
Copyright © 2017, The Daily Star. All rights reserved. Provided by SyndiGate Media Inc. (Syndigate.info).
