Pakistan raises $2.5bn in dollar debt as reserves fall
November 30 2017 08:27 PM


Pakistan raised $2.5bn in dollar-denominated debt as it seeks to pump up foreign-exchange reserves that have slumped 25%.
The South Asian nation issued $1.5bn of 10-year notes at 6.875% after initial guidance in the low 7% area and $1bn of 5-year sukuk at 5.625%, down from initial price talk of 6%, according to a person familiar with the deal. The country was targeting a sale of as much as $3bn, Prime Minister Shahid Khaqan Abbasi said in a text message this week.
“Given financing pressures, I wouldn’t be surprised if the government prioritized size over price,” Mark Baker, a Hong Kong-based money manager at Aberdeen Standard Investments, said earlier this week. Pakistan’s economic situation has become more challenging, with the fiscal and current-account deficits widening, he said.
Pakistan received more than $8bn orders for the $2.5bn bond offering, the finance ministry said in an emailed statement yesterday. It priced the 10-year bond at a record low yield, it said
The government raised $500mn from 10-year bonds at a yield of 8.25% in 2015, according to data compiled by Bloomberg. It also sold $1bn of 10-year notes in 2014 at 8.25%, or 557.3 basis points over US Treasuries. While spreads on those April 2024 bonds tightened significantly last year, they widened in recent months, touching 433 basis points in November, the most since January 4.
The nation’s economy is showing signs of stress, with the current-account deficit more than doubling to $14.4bn in the year through September. Foreign-exchange reserves held with the central bank dropped by 25% to $13.3bn in the year to September 30. “Some additional premium is warranted to reflect Pakistan’s political and economic woes,” Nicholas Yap, a credit desk analyst at Nomura International (HK) Ltd in Hong Kong, wrote in a report. Nomura recommends that investors participate with rates of at least 6.875% for the 10-year bond, and 5.7% for the Sukuk. “Most of the negatives have been priced in at current levels,” Yap said.

There are no comments.

LEAVE A COMMENT Your email address will not be published. Required fields are marked*