Pakistan 5-year CDS drops by 1,240bps to 4,676bps

MG News | July 05, 2023 at 01:03 PM GMT+05:00

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July 05, 2023 (MLN): Pakistan’s Credit Default Swap (CDS) continued to fall as 5-year CDS recorded a drop of 1,240 basis points (bps) to 4,676 bps in July compared to 5,916 in June.

After reaching its all-time high of 12,388 bps on November 22, 2022, the CDS witnessed a plunge of 7,712 bps.

For the unworst, CDS serves as a form of insurance that investors purchase to safeguard against the risk of credit default on corporate and sovereign bonds.

A higher spread indicates a higher risk of credit default, whereas a narrower spread suggests a lower risk of credit default.

The International Monetary Fund (IMF) and the Pakistani authorities reached a Staff-Level Agreement (SLA) on policies to be supported by a Stand-By Arrangement (SBA) which was finalized on June 29, 2023.

As a result, the country secured a lifeline from a potential debt default.

Moreover, the IMF board is scheduled to meet the Pakistan side on July 12, 2023, following the SLA.

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