BEIRUT: Prices of Lebanons Eurobonds increased slightly Tuesday following reports that Saudi Arabia is preparing to provide some kind of assistance to help the government tackle the budget deficit. According to Reuters, the 2024, 2025 and 2027 Eurobond issues rose more than 0.8 cents to the dollar after three former prime ministers indicated that Saudi Arabia may offer new support to debt-laden Lebanon.

The agency was referring to the visit of three former prime ministers to Saudi Arabia.

It is not clear what kind of assistance Saudi Arabia may provide to Lebanon, although Riyadh made no indication that it will assist the country financially.

But sources said that Saudi Arabia may buy $1 billion in Eurobonds to help improve the bond market.

On July 1, the prices of Lebanese bonds on the international market improved following the announcement of Qatar that it had started buying $500 million worth of Lebanese Eurobonds.

Bloomberg News quoted a Qatari official, who spoke on condition of anonymity, saying that Doha had started buying $500 million in Lebanese sovereign Eurobonds. The official did not give further details.

Marwan Barakat, the head of the Economic Research Department at Bank Audi hopes that the rise in the prices of Eurobonds could pave the way for further improvement in the performance of these bonds.

The main signals that can trigger increases in Lebanese Eurobond prices looking forward are tied to factors that would improve the sovereign creditworthiness of the state, Barakat told The Daily Star.

He added that among these factors that would improve the prices of Eurobonds are the ratification by Parliament of a 2019 budget law with an acceptable deficit along with the quick launch of the 2020 budget process; unlocking of part of CEDRE pledges by the donor community; additional support on behalf of GCC countries in the form of deposits at Banque du Liban or the purchase of Lebanese Eurobonds from BDLs portfolio or from the secondary market; and positive results of the oil and gas drilling operation by year-end.

Such signals, if they materialize, would trigger market demand for Lebanese Eurobonds, contracting their yields and reducing the prevailing gap between actual and potential spreads that Goldman Sachs evaluated at 450 basis points, Barakat explained.

On Monday, Global investment bank Goldman Sachs indicated that Lebanons credit spreads have outperformed most peers since June 2019 due to improving risk sentiment and to the announcement that Qatar purchased Lebanese Eurobonds as part of the $500 million pledge it made in January 2019. It noted that it is still unclear if Qatars financial support will serve as an early signal of the materialization of pledges from other Gulf Cooperation Council countries, specifically from Saudi Arabia and Kuwait. It judged that the materialization of support from GCC countries would reduce market concerns, improve investor sentiment, and would help narrow Lebanons spread to the 500 basis point range.

Goldman Sachs also indicated that Lebanons Eurobonds that have a maturity of five years are undervalued.

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