Bond Yields To Rise On Political Risk?

The recent downside in Lebanese stocks, alongside the spike in its 5-year CDS, suggests to us that there could be a sell-off in bonds as well. Even if there weren't a threat of conflict with Israel and a potential drop in global risk appetite to contend with, the rally since Q408 could be argued to have been overdone. Here we highlight the US$ 2014 instrument, which has seen its yield from from 11.3% to just 5.1% over the last 18 months. The spread over equivalent USTs is now just 258bps, which in our view is too low for a country

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