Pakistan’s Dollar Bonds Crash Following Election Results

Pakistan’s sovereign bonds have fallen by up to 5 per cent in the past 24 hours, with investors taken aback by the majority of the candidates giving a tough time to state-backed political parties.

According to analysts tracking developing-country dollar-denominated bonds, the 2024 bond was seen dropping by 1.8 per cent to about 96 cents on the dollar. Meanwhile, 2025, 2026, and 2027 bonds are trading at 84 cents/$, 75.6 cents/$, and 71.6 cents/$, down by 4.3 per cent, 4.5 per cent and 4.3 per cent, respectively, in the past 24 hours.

The yield on the bond maturing on January 31, 2029, declined by 5 per cent to 80.6 cents on the dollar. The yield on coupon due April 8, 2031, has slid to 64.7 cents; the yield on the 2036 paper is down by 4.5 per cent to 65.6 cents on the dollar.

Meanwhile, the government paper maturing on April 8, 2051, showed a 5 per cent decline to arrive just above 61 cents on the dollar.

An investment banker who could not cast his vote at a federal capital polling station yesterday told ProPakistani, “Pakistan’s political unrest has made investors wary, causing bond prices to crash. The country’s situation remains uncertain after today, with investors keeping a close eye on any further developments that may have an impact on the country’s financial stability. External private and government lenders will slow investments if instability ensues due to the contentious unveiling of polling results. Expect FIPI to chunk out, PSX trends will show next week”.

Notably, Pakistani dollar-denominated maturities surged 9 per cent in January, making the world’s best-rated coupons world. This trend may take a break due to reports of rigging and intentional delays by Pakistan’s Election Commission. “This is highly irregular of ECP. Slowed poll results have driven market sentiments into a tight corner,” the banker added.

It is pertinent to mention here that Moody’s Investors Services (Moody’s) said in a brief review of the South Asian market today that a timely announcement of election results leading to a smooth formation of a new government will reduce policy and political uncertainty in Pakistan.

It said the newly elected government must also implement a longer-term financing plan to meet its large external debt obligations for the next few years.

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