Pakistan’s sovereign bonds experienced a significant drop, plummeting by up to 5 percent within the past 24 hours, leaving investors startled. The surprising factor for investors was the formidable challenge posed to state-backed political parties by the majority of candidates. Analysts observing the dollar-denominated bonds of developing countries noted that the 2024 bond fell by 1.8 percent to approximately 96 cents on the dollar. Concurrently, the 2025, 2026, and 2027 bonds saw declines of 4.3 percent, 4.5 percent, and 4.3 percent, trading at 84 cents/$, 75.6 cents/$, and 71.6 cents/$ respectively over the same period.
The yield on the bond maturing on January 31, 2029, decreased by 5 percent to 80.6 cents on the dollar. Additionally, the yield on the coupon due on April 8, 2031, dropped to 64.7 cents, while the yield on the 2036 paper fell by 4.5 percent to 65.6 cents on the dollar.
Meanwhile, the government paper maturing on April 8, 2051, exhibited a decline of 5 percent, settling slightly above 61 cents on the dollar.
READ MORE: Election Commission Still Struggling to Finalize Results 18 Hours After Polls Closed.
An investment banker, unable to cast his vote at a federal capital polling station, expressed concerns over Pakistan’s political unrest, attributing it to the wariness among investors and the subsequent crash in bond prices. The situation in the country remains uncertain post-election, with investors closely monitoring developments that could impact financial stability. The banker warned of potential slowdowns in external private and government investments if instability persists due to delayed polling results, with implications expected in Foreign Institutional Portfolio Investment (FIPI) and Pakistan Stock Exchange (PSX) trends in the coming week.
It is noteworthy that Pakistani dollar-denominated maturities experienced a remarkable 9 percent surge in January, establishing themselves as some of the best-rated coupons globally. However, reports of electoral rigging and intentional delays by the Election Commission of Pakistan are now threatening this trend. Moody’s Investors Service emphasized the importance of timely election results for reducing policy and political uncertainty in Pakistan, while also urging the newly elected government to devise a comprehensive financing plan to address the country’s substantial external debt obligations over the coming years.
