Pakistan’s sovereign dollar-denominated bonds have continued to rally due to an improvement in economic indicators and credit rating upgrades.
“Pakistan International Bond prices continue to trade upward and have reached a four-year high,” said Topline Securities in a note on Saturday.
While yields have come down and are below 8.0 per cent, a level seen earlier in Jan-2022. Significant rally in bond prices is attributed to substantial improvement in economic indicators and recent rating upgrade by three international rating agencies, S&P, Moody’s and Fitch, it added.
Data compiled by a brokerage firm shows that Pakistan’s Eurobonds, worth $1 billion and maturing in April 2031, are priced at 97.3 cents, resulting in a yield of 7.9 per cent.
Saad Hanif, head of research at Ismail Iqbal Securities, said that Pakistan’s Eurobond rally is driven less by the headline rating upgrades and more by the underlying shift in risk perception.
“The upgrades from S&P, Moody’s and Fitch validate what investors were already seeing: a steadier macro backdrop with lower inflation, a shrinking current-account gap, stronger FX reserves and an IMF programme that reduces near-term default risk,” Hanif said.
“At the same time, softer US Treasury yields and renewed demand for emerging-market debt have lowered the global cost of capital, while Pakistan’s lack of new Eurobond issuance tightens supply,” he added.
Together these factors compress credit spreads and push yields below 8.0 per cent, making the ratings improvement a catalyst but not the sole reason for the four-year high in prices, he noted.
Pakistan’s economy has shown recovery after facing unprecedented challenges. The country’s foreign exchange reserves have nearly tripled, rising from $4.4 billion at the end of FY23 to $14.5 billion by the end of FY25. This is attributed to an improved current account, increased dollar buying by the State Bank of Pakistan, and a surge in remittances.
“Improvement in Pakistan credit ratings due to increase in foreign exchange reserves and surplus current account is being reflected in prices of euro bonds issued by Pakistan,” said Awais Ashraf, director of research at AKD Securities Limited.
“This would help us to raise funds from the international market at cheaper rates and enhance confidence in currency and our external account management,” Ashraf added.
Pakistan plans to issue its first-ever tranche of Panda bonds before December this year, Bloomberg reported.
According to the report, Pakistan aims to raise $250 million through the yuan-denominated debt.
Reference Link:- https://www.thenews.com.pk/latest/1343547-pakistan-s-dollar-bonds-jump-to-four-year-high