August 20, 2019 / 3:55 PM / 3 months ago

Lebanon's dollar bonds fall on risk of credit rating downgrade by S&P Global

LONDON, Aug 20 (Reuters) - Dollar-denominated bonds issued by Lebanon’s government dropped to new lows on Tuesday on worries about the risk of a sovereign credit rating downgrade by S&P Global.

The 2027 issue slumped by 2 cents in the dollar to trade at its lowest level, while the 2026 issue shed 2.4 cents to also reach a new low, according to Tradeweb data.

“There’s an upcoming rating review by S&P and people are focusing on the possibility of a downgrade,” said Giyas Gokkent, of JPMorgan Securities. “S&P has a negative outlook on Lebanon’s long term sovereign ratings and the central bank governor has said a downgrade could impact banks’ capital adequacy levels.” S&P is due to publish its review of Lebanon on Friday. Mounting worries about Lebanon’s finances saw S&P put the country’s B- rating on a negative outlook at the start of March. In anticipation of the move, the cost of insuring against a Lebanese sovereign default has also soared in recent days, with 5-year credit default swaps (CDS) quoted on Tuesday by IHS Markit at 1,096 bps.

Reporting By Tom Arnold; Editing by Ritvik Carvalho

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