May 05, 2023 (MLN): The sovereign bonds of Pakistan will likely see a jump in the near term if the country successfully rolled over the debt, as per Barclays.
The country has started its budget planning while the talks with the International Monetary Fund (IMF) may be further delayed. Meanwhile, the recent bilateral funding and rollovers have brought down some of the pressure on foreign reserves.
However, the country is still suffering from an acute balance of payment and a shortage of fx reserves.
The bank further stated, “After this year’s elections, the new government will negotiate another program with the IMF.”
Barclays in the same statement recommended buying bonds maturing in 2027 as it expects a coupon payment due in June to be paid.
At the same time, the bank retained an underweight rating on the country's sovereign debt owing to the weak fundamentals.
“We believe that Pakistan’s external position is still vulnerable, with high external debt and a large current account deficit,” Barclays said.
The bank also foresees risks from political uncertainty and social unrest.
Despite the risks, Pakistan’s sovereign bonds offer attractive yields, with the 10-year bond yield currently around 12%, it added.
The country's sovereign bonds are likely to outperform other emerging market debt in the near term. However, investors should remain cautious as there are still risks to the outlook, it noted.
