BEIRUT: Figures released by Certificate of Deposits CDS and bond pricing firm CMA Datavision show that spreads on 5-year credit default swaps for Lebanon ended the second quarter of 2011 at 351 basis points, widening by 3.3bps from 347.7bps at the end of the first quarter of the year and by 52.9bps from 298.1bps at end-2010.

Lebanon’s CDS spreads widened during the first quarter and remained high in the second quarter due to the deterioration of political conditions in the country since last January, as well as to the turmoil across the MENA region during the covered period, as reported by Lebanon This Week, the economic publication of the Byblos Bank Group.

Lebanon’s 5-year CDS spreads widened by 28.5bps between end-2009 and end-2010, reflecting market stability last year.

The firm said that Lebanon’s CDS spreads widened by just 0.95 percent, compared to the worst performers during the quarter such as Greece that posted a 102.5 percent change, followed by Slovenia with 42.6 percent, Portugal with 38 percent, Hong Kong with 34.6 percent, and Slovakia with 30.8 percent.

In parallel, CMA noted that the best performers in the second quarter were dominated by the Middle East as the unrest subsided, with Bahrain being the top performer posting a tightening in spreads of -27.4 percent change, followed by Saudi Arabia with -20.2 percent, Costa Rica with -18.1 percent, Dubai with -16.7 percent, and Abu Dhabi with -13.7 percent.

CMA Datavision said Lebanon ended the second quarter of 2011 with a five-year cumulative probability of default (CPD) of 22.2 percent, deteriorating from 21.9 percent at the end of the first quarter of 2011 and 20.5 percent at the end of June 2010.

It said the CPD quantifies the probability of an issuer being unable to honor its debt obligations over a given time period. It added that the CPD is a function of the market’s recovery level, which varies according to several factors and distance to default.

It calculates the CPD using an industry standard model and proprietary credit data. Lebanon’s CPD at end-June shows that its debt was less risky than that of Ukraine (28.6 percent), Argentina (34.9 percent), Pakistan (44.9 percent), Ireland (47.2 percent), Portugal (47.6 percent), Venezuela (51.4 percent) and Greece (80.6 percent). Norway, Sweden and Finland had the lowest CPDs among the 67 sovereigns in the survey, with rates of 1.9 percent, 2.4 percent and 3.1 percent, respectively.

The firm maintained Lebanon’s rating of ‘CMA_bb-’ in 2011’s second quarter, which is based on its proprietary CMA Implied Ratings methodology.

It also maintained the ratings of Egypt, Iraq and Saudi Arabia in the region, while it downgraded the ratings of Turkey, Tunisia, Morocco, Israel, Qatar and Abu Dhabi. Dubai and Bahrain were the only two sovereigns in the region upgraded by the firm during the quarter.