Pakistan’s Eurobonds jump to multi-year highs

It comes after successful coupon payments to investors

KARACHI:

Pakistan’s US dollar-denominated Eurobonds and Sukuk have staged a smart rally in the international market this month, as their prices jumped up to 14% to multi-year highs after the government successfully made coupon payments to investors.

The bonds got strong support as Pakistan met almost all the conditions set by the International Monetary Fund (IMF) for the first review under the $3 billion loan programme. The review is slated for November 2, 2023.

According to data compiled by Arif Habib Limited, Pakistan’s 10-year Eurobonds worth $1 billion and maturing in April 2024 spiked 2.4% to multi-year highs at 90.53 cents on Friday.

The bond price has so far bounced back 10.1% in October while its yield has dropped to 31.8% compared to over 100% in June 2023 when the risk of default by Pakistan on foreign debt had peaked. However, the award of IMF’s $3 billion standby arrangement provided the much-needed relief that helped ward off the default.

Meanwhile, the price of Pakistan’s second 10-year Eurobonds of $500 million, maturing in September 2025, surged 7.7% on a day-on-day basis to 71.01 cents.

Its price has cumulatively rebounded 14.2% in October with its yield falling to 29%.

Prices of other five bonds with a combined value of $5.3 billion, which are maturing between April 2025 and April 2051, increased in the range of 1% to 4% in October.

The price of only one bond, the seven-year Sukuk worth $1 billion maturing in January 2029, dropped 1% in the month to 60.80 cents.

An analyst said the smart price rally suggested that the global markets were becoming favourable for Pakistan. “The country can go back to the international capital markets to raise new foreign debt at reasonably good prices in the near future.”

The confidence of global investors got a boost after Pakistan met all IMF conditions before the first review.

The last two targets achieved in recent days was the primary surplus of 0.4% of gross domestic product (GDP) and up to 193% increase in gas prices with effect from November 1, 2023, he pointed out.

Pakistan is set to receive the second IMF loan tranche of $700 million after the November review. This will prompt other multilateral and bilateral creditors to extend financing to Pakistan, leading to an increase in the foreign exchange reserves, which currently covers two months of imports at $7.5 billion.

Published in The Express Tribune, October 29^th, 2023.

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