Pakistan’s sovereign bonds will probably rise in the near term as the country is expected to avert a default in the event of a debt rollover, reported Bloomberg.
While talks with the International Monetary Fund (IMF) may be postponed further as Pakistan begins its FY24 budget planning, recent bilateral funding and rollovers have relieved some of the pressure on foreign reserves, according to Avanti Save, a strategist at credit research firm Barclays.
The note also read, “After this year’s elections, the new government will negotiate another program with the IMF”.
In the same statement, Barclays advised investors to buy bonds maturing in 2027 because a coupon payment due in June is expected to be made. However, it maintains an underweight rating on Pakistan’s sovereign debt due to weak fundamentals and the expectation that “news will remain a drag as politics take center stage in the coming months”.
While Pakistan’s sovereign bonds have been pricing a high chance of a default/restructuring since September 2022, Barclays maintains that the South Asian economy’s maturities offer attractive yields, with the 10-year bond yield currently hovering around 12 percent.
“We believe that Pakistan’s sovereign bonds are likely to outperform other emerging market debt in the near term,” the bank said. “However, we would caution investors that there are still risks to the outlook,” it added.
