Pakistan’s Eurobond yields fall across all maturities

August 10, 2022 (MLN): Pakistan’s dollar-denominated sovereign bond yields fell in the range of 3% to 28.5% across nine different instruments when compared to the peak of yields on July 19, 2022 as the fears of Pakistan’s getting into a default-like situation evaporated.

The statement by finance minister Miftah Ismail on Tuesday that says, "The serious worries about Pakistan getting defaulted like Sri Lanka have been averted due to significant austerity measures, and belt-tightening"  injected positivity among investors.

Further, the improved fundamentals driven by a positive statement from IMF’s Resident for Pakistan regarding the completion of all prior actions for loan review, also boosted the foreign investors’ confidence which can be seen in the country’s bonds' performance.

As per data released by Ismail Iqbal Securities on Wednesday, the yields of bonds maturing this year declined by 28.5% to 22%. To recall, the bond reached its high of 50% on July 19, 2022, owing to the rising concerns over the deterioration in the country's external liquidity position and financing conditions since early 2022.

However, an improvement in July’s trade deficit numbers supported by lower imports has improved the outlook for the country’s current account balance. The positive IMF statement and narrowed trade deficit have also reduced pressure on the PKR since last week, as the local unit was trading at 220 per USD, appreciating by over four rupees in the interbank market when compared to the previous close of 224 per USD.

Meanwhile, sovereign bonds’ yield maturing in 2024 dropped by 17.9% to 31.9%. Yields went down by 7.8% to 25.35% for the government paper maturing in 2025 against the peak of 33.2% seen on July 19, 2022.

Similarly, the yields for Eurobonds maturing in 2026, came down by 8.20% to 21.2% from 29.4% on July 19, 2022.

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