Pakistan’s dollar bonds, which have emerged among the best-performing bonds in the region, are likely to extend their rally as credit-rating upgrades and the government’s plans to re-enter global debt markets bolster sentiment, investors told Bloomberg.
Earlier, the international media outlet, while quoting Khurram Schehzad, adviser to the finance minister, said that Pakistan plans to raise funds through dollar bonds next year, after a hiatus of nearly five years.
The move could fuel further gains in its debt, according to Goldman Sachs Asset Management and UBS Asset Management, read the report.
“Its dollar bonds have gained 24.5% this year, outperforming peers with similar credit ratings such as Egypt and Argentina,” stated the report.
Danske Bank Asset Management, which bought Pakistan’s dollar bonds at the height of its financial crisis two years ago, has added to its holdings several times this year, said Søren Mørch, head of emerging markets debt. “We are optimistic that Pakistan will stay on the reform course, rebuilding buffers like higher dollar reserves and also getting market access and taking advantage of that,” Mørch said.
Last month, Finance Minister Muhammad Aurangzeb announced that Pakistan plans to re-enter the international capital markets with a Eurobond issuance under its Global Medium-Term Note (GMTN) program in 2026.
Back in September, Pakistan successfully repaid its $500 million Eurobond, which matured on September 30, 2025. Issued in 2015 to global investors with a 10-year tenor, the bond matured on September 30, 2025.
“The outperformance will sustain as long as they’re sticking to the IMF policies, which we believe they have a strong commitment to do so,” said Shamaila Khan, head of fixed income emerging markets & Asia Pacific at UBS Asset Management.
Market access possibly opening for Pakistan is another positive, because “then you really are not concerned about refinancing over the next two to three years,” she added.
However, Bloomberg warned that tensions with neighbours India and Afghanistan pose risks, while a rise in energy prices could strain finances.
However, investors remain upbeat, it said.
“In the next six to 12 months, we see rating upgrades as the first catalyst and market access as the next catalyst” for capital appreciation in markets like Pakistan, said Salman Niaz, head of global fixed income for APAC ex-Japan at Goldman Sachs Asset Management.
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