Pakistan’s Eurobond Yields Significantly Down Across All Maturities

The yields on all the Pakistani Eurobonds declined globally for the second consecutive day on 4 August 2022 as clarity from the International Monetary Fund (IMF) and future growth outlook boosted overseas investors’ confidence in the South Asian economy.

According to data released by Ismail Iqbal Securities on Thursday, sovereign bond yields went down by 50-1,470 basis points (bps) across eight different instruments as compared to Wednesday’s drop of 30-410 bps.

The yield on the five-year Eurobond maturing on 5 December 2022 dropped by 14.7 percent to 25.4 percent from 40.1 percent on Thursday, while the yield on the 10-year paper maturing on 15 April 2024 fell to 36.6 percent from 41.8 percent. It is noteworthy that the yield on sovereign investment bonds maturing in 2024 peaked at 50.3 percent on 19 July 2022.

Sovereign bond yield for the five-year government paper maturing on 8 April 2026 fell by 320 bps from 26.6 percent to 23.2 percent. Yields went down by 220 bps to 20 percent for the 10-year paper maturing on 5 December 2027, 50 bps to 13.5 percent for the seven-year paper maturing on 31 January 2029, 130 bps to 17.1 percent for the 2031 paper, and 130 bps to 16.4 percent for the 2036 paper.

The yield on the 30-year international bond maturing on 8 April 2051 declined by 150 bps to 16.7 percent.

The IMF’s Resident Representative for Pakistan, Esther Perez Ruiz, confirmed on 2 August 2022 that Pakistan has fulfilled the preconditions for the seventh and eighth joint review by increasing the petroleum development levy (PDL) on 31 July. Consequently, this statement helped reduce fears of delay in the IMF program. Since then, Pakistan Eurobond yields have also fallen massively across all maturities and are trading at around 13.5-36.6 percent per tenor, respectively.

Although foreign exchange reserves of $8.6 billion still remain low, the revival of the IMF program and flows from both bilateral and multilateral agencies are likely to help support foreign exchange reserves. Lower imports are also anticipated to curtail the current account deficit going forward (clocked in at $2.2 billion in June 2022), and will help curb depletion in the country’s reserves.



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