Pakistan Sells $2.5 Billion of Bonds


Pakistan sold a $2.5 billion dollar bond in a key test of investor sentiment after the resumption of a $6 billion bailout program with the International Monetary Fund.

The South Asian nation’s three-part note offering priced with each portion at a yield lower or at the tight end of early pricing discussions, people familiar with the matter said, asking not to be identified because they’re not authorized to speak about it.

The debt deal comes amid a flurry of developments in recent days, as Pakistan’s economy grapples with continued fallout from the pandemic. Prime Minister Imran Khan named a new finance minister on Monday, its third finance chief in less than three years. The IMF was set to release about $500 million to the country as the lender’s board completed certain reviews of a $6 billion bailout program, according to a statement last week.

The $1 billion five-year note yields 6% after initial discussions of 6.25% area.

The $1 billion 10-year note yields 7.375% after initial discussions of 7.5% area.

The $500 million 30-year bond yields 8.875% after initial discussions of 8.875%-9%.

Fair value is at high-5% for the five-year securities, low-7% for the 10-year portion and high-8% for the 30-year bond, according to Nicholas Yap, credit analyst at Nomura International (HK) Ltd.

The “bonds should see decent investor demand following a number of positive developments in the country of late” including the IMF loan resumption, Yap wrote in a report Tuesday.

The government plans an “international Sukuk transaction sometime after the Eurobond issuance,” the finance ministry said in a reply to questions last week. The country expected to raise more than $1.5 billion in global bonds if market conditions remained conducive, Muhammad Umar Zahid, director of debt at the ministry, said last month.

Credit markets have been busy this quarter, despite a run-up in rates in recent weeks. The Maldives, another non-investment grade sovereign borrower, sold a $200 million dollar five-year Sukuk security this week at 10.5%.

Pakistan is raising funds through the global market for the first time after pricing $2.5 billion of securities in 2017.

It’s doing so as the foreign exchange market sends more bullish signals.

Pakistan’s rupee has advanced to around its highest level against the dollar in nearly two years. It has gained about 4% so far in 2021, the only currency to strengthen against the dollar in Asia, according to a basket of currencies compiled by Bloomberg.

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