Sovereign dollar bonds extend decline

Shorter-dated bonds fall more than 1 cent

Reuters July 21, 2023


Pakistan’s sovereign dollar bonds extended a decline on Thursday, with Tradeweb data showing shorter-dated maturities falling as much as 1.3 cents.

The slide began on Wednesday after the government said it will launch criminal proceedings against former prime minister Imran Khan for allegedly exposing official secrets.

The 2024 and 2025 notes have fallen nearly 5 cents from last week’s high, forfeiting the gains they notched since the International Monetary Fund (IMF) board signed off on a $3 billion funding deal on July 12.

The 2024 bond was trading at 77 cents on the dollar, and the 2025 was at 59.65 cents on the dollar at 0836 GMT. The former was more than 30 cents above its lowest level in March, while the latter was more than 20 cents above its 2023 low.

Last week, investors piled back into bonds in Pakistan following cash infusions and optimism over multilateral support, but the nation has secured only enough help to limp to autumn elections, experts said.

The rally in international bonds intensified over the past two weeks, seeing returns on Pakistan’s bonds soar to above 45% year-to-date, making them some of the best performers in their asset class, according to JPMorgan data.

But the boost in the bonds belies the difficulties Pakistan faces implementing major reforms once new leader arrives after upcoming elections.

“It’s not enough to resolve the country’s issues – not nearly enough,” said Carlos de Sousa, emerging market portfolio manager at Vontobel Asset Management said of Pakistan’s recent funding gains.

Published in The Express Tribune, July 21st, 2023.

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