News

Lebanon Faces First-Ever Bond Default

Many people may not be aware of Lebanon's historically high standing in the world of banking.

As the Economist recently noted, the nation has been called the "Switzerland of the Middle East" for its snowy mountain peaks and sophisticated banking sector.

However, Lebanon's finances have taken a big turn for the worse. Indeed, it appears the country faces its first-ever bond default.

Here's a CNBC article excerpt (Feb. 24):

Investors holding Lebanese bonds are expecting the worst, as years of financial mismanagement may well push the country to default on its debt for the first time in its history.

International Monetary Fund officials have been called in to help find a solution to manage Lebanon's overwhelming debt -- some 160% of GDP, the highest ratio in the world -- amid the worst financial crisis since the Mediterranean country's brutal 1975-90 civil war and months of popular protests.

Lebanon was hit with a double downgrade over the weekend by two of the world's largest ratings agencies, dragging its sovereign credit rating further into junk territory. Moody's and S&P Global Ratings downgraded Lebanon's long-term foreign currency rating to Ca and CC, respectively -- both of which are ten levels below investment grade. The country is now rated lower than Argentina and the Democratic Republic of Congo.

"As a consequence of severe fiscal, external, and political pressures, we believe a distressed exchange or unilateral default on Lebanon's commercial debt is virtually certain at this point," an analyst report from S&P Global said last week...

As the deadline looms for Lebanon's $1.2 billion Eurobond, maturing March 9, the bond's price has whipsawed from 90 cents in the dollar in early February to a record low 53 cents last week, with the yield on those eurobonds surpassing 1,000%. The lira, officially pegged to the dollar, has plummeted 40% on the black market as local banks ration dollars necessary for imports of food, medicine and other essential goods.

As the 2018 edition of Conquer the Crash warned:

Consider that only $4 trillion worth of total global debt is AAA. That's only 2%; 98% of the debt is graded lower. This fact portends a slew of defaults...

This is the time to prepare for what Elliott Wave International's global analysts see ahead by reading the free report: What You Need to Know Now About Protecting Yourself from Deflation.

By submitting this form you authorize EWI to send regular emails and updates. You may unsubscribe from our mailing list at any time.