The cost of insuring Lebanon’s sovereign debt against default jumped to a fresh record high and the country’s dollar-denominated bonds came under pressure again on Wednesday after mounting tensions with Israel.
Lebanon’s 5-year credit default swaps (CDS) rose by 21 basis points (bps) from Tuesday’s close to 1229 bps, data from IHS Markit showed.
The country’s eurobonds also came under pressure with the 2030 and 2035 issues both slipping around 0.5 cents to hit their lowest level on record, according to Refinitiv data.
President Michel Aoun said on Monday that Lebanon had a right to defend itself, likening Israeli drone strikes to a "declaration of war" amid rising tensions between Hezbollah and Israel.
On Friday, Fitch downgraded Lebanon's credit rating to CCC while Standard & Poor's kept it at B-/B.
Lebanon is grappling with one of the world’s heaviest public debt burdens at 150 percent of GDP and years of low economic growth.
Last month, Lebanon's parliament ratified a controversial austerity budget that aims to save the economy.
