As optimism restores, confidence of global investors in Pakistani bonds returns

Yield rates - which rose sharply amid political, economic uncertainty - retain better values

The confidence of international investors in Pakistan’s economy has started to restore as the yield on foreign bonds has dropped significantly in the last 20 days after peaking to record levels amid political and economic uncertainty.

It was only last month that the record devaluation of the Pakistani rupee against the US dollar and economic uncertainty harmed international investors’ interest in Pakistani bonds.

Due to such disinterest, the yield on bonds maturing this year skyrocketed to 50.32% on July 19.

According to a report by Topline Securities, the return rate on bonds maturing this year has dropped by 28.53% between July 19 and August 10 - indicating betterment. In the same span, the yield came down by 17.91% on bonds maturing in 2024 and 7.83% on those maturing in 2025.

Currently, the return rate on bonds maturing this year is 21.79% while it is 31.90% on bonds maturing in 2024. It is 25.35% on bonds maturing in 2025 and 21.19% on those maturing in 2026.

This percentage has dropped to 12.56% on bonds maturing in 2029 - the lowest on any bonds till 2051.

Abdul Azeem – Research Head at Spectrum Securities – said that due to political and economic turmoil Pakistan went through last month and Finch Ratings downgrading Pakistan’s credit rating induced pessimism among the global investors that the country was about to default.

However, he added that the situation had normalized now.

Azeem said that Pakistan has to float Sukuk bonds in the international market and this positive change will benefit it.

Muhammad Shehryar from Darson Securities said that Pakistan has eluded default situation as it pin hopes on bailout packages from friendly countries and approval of tranche by the International Monetary Fund (IMF).

He said that the confidence of local and international investors was gradually restoring which was evident from the positive response in the international bonds market.

Shehryar added that the investors have also put together again at the Pakistan Stock Exchange (PSX).


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