Pakistan raises $2 billion through Eurobonds
The dollar-denominated bonds fetch highest amount Pakistan has ever raised in a single attempt from int'l investors.
The higher-than-benchmark rate is attributed to the ‘premium’ that Pakistan must pay on its sovereign bonds in order to generate investor interest. PHOTO: FILE
KARACHI:
Pakistan successfully raised $2 billion from global capital markets through the issue of five- and 10-year Eurobonds on Wednesday, according to a local brokerage house.
The latest dollar-denominated bonds have fetched the highest amount that Pakistan has ever raised in a single attempt from international investors.
According to Topline Securities Research Analyst Zeeshan Afzal, the government has raised $1 billion through five-year bonds at a fixed rate of 7.25%, which is as many as 558 basis points above the benchmark five-year US Treasury rate. The rest of the $1 billion was generated through 10-year bonds at a fixed rate of 8.25%, which is 556 basis points above the corresponding 10-year US Treasury benchmark rate.
The higher-than-benchmark rate is attributed to the ‘premium’ that Pakistan must pay on its sovereign bonds in order to generate investor interest, given that investment in Pakistani bonds is riskier than that in the US treasury instruments.
Afzal said the overwhelming bidding size is a testament to the confidence that international investors have in the economy of Pakistan, as the issue was oversubscribed many times against the initial target of $500 million. “Improved investor perception about Pakistan should mainly be attributed to the government’s reform process, IMF programme and improving economic outlook,” he noted.
Most investors were from the United States, as they bought 59% of the five-year bonds and 61% of the 10-year bonds.
Currently, three Eurobonds of Pakistan are outstanding. They include 2016 bond ($500 million) yielding 5.81%, 2017 bond ($750 million) yielding 6.18%, and 2036 bond ($300 million) yielding 9.25%.
“This deal will help Pakistan get better response in the upcoming telecom licence sale and the privatisation deals beside supporting the local currency,” Afzal added.
[infogram url="https://infogr.am/outstanding-eurobonds" height="380"]
Pakistan successfully raised $2 billion from global capital markets through the issue of five- and 10-year Eurobonds on Wednesday, according to a local brokerage house.
The latest dollar-denominated bonds have fetched the highest amount that Pakistan has ever raised in a single attempt from international investors.
According to Topline Securities Research Analyst Zeeshan Afzal, the government has raised $1 billion through five-year bonds at a fixed rate of 7.25%, which is as many as 558 basis points above the benchmark five-year US Treasury rate. The rest of the $1 billion was generated through 10-year bonds at a fixed rate of 8.25%, which is 556 basis points above the corresponding 10-year US Treasury benchmark rate.
The higher-than-benchmark rate is attributed to the ‘premium’ that Pakistan must pay on its sovereign bonds in order to generate investor interest, given that investment in Pakistani bonds is riskier than that in the US treasury instruments.
Afzal said the overwhelming bidding size is a testament to the confidence that international investors have in the economy of Pakistan, as the issue was oversubscribed many times against the initial target of $500 million. “Improved investor perception about Pakistan should mainly be attributed to the government’s reform process, IMF programme and improving economic outlook,” he noted.
Most investors were from the United States, as they bought 59% of the five-year bonds and 61% of the 10-year bonds.
Currently, three Eurobonds of Pakistan are outstanding. They include 2016 bond ($500 million) yielding 5.81%, 2017 bond ($750 million) yielding 6.18%, and 2036 bond ($300 million) yielding 9.25%.
“This deal will help Pakistan get better response in the upcoming telecom licence sale and the privatisation deals beside supporting the local currency,” Afzal added.
[infogram url="https://infogr.am/outstanding-eurobonds" height="380"]