By Staff Reporter
KARACHI: Pakistan’s long-dated dollar bonds rallied for a second day on Friday, hitting fresh three-year highs, after S&P Global upgraded the country’s sovereign credit rating to ‘B-’ with a stable outlook, citing the International Monetary Fund’s support in stabilising its strained finances.
The 2031 and 2036 maturities both gained around 1.6 cents to bid at 93.85 cents and 87 cents respectively, lifting them to their highest levels since early 2022. The 2051 maturity surged 1.6 cents, while shorter-dated bonds posted more modest increases. The uptick reflects investor optimism about Pakistan’s ability to manage its debt load and access capital markets, bolstered by the rating upgrade a day earlier.
S&P Global raised Pakistan’s credit rating by one notch, stating that the stable outlook reflects expectations of continued economic recovery and government efforts to enhance revenue, which will stabilise the country’s fiscal and debt metrics. The agency pointed to IMF backing as a cornerstone of Pakistan’s improved finances and reserves. “We also expect that sustained official financing will support Pakistan in meeting its external obligations, and that the country will continue to roll over its commercial credit lines over the next 12 months,” S&P said.
Meanwhile, in the domestic market, Karachi Interbank Offered Rate (KIBOR) rates for one-week to six-month tenors declined on Friday, signaling market expectations of further monetary easing. KIBOR represents the average interest rate at which banks are willing to lend to each other. The one-week KIBOR decreased by 3 basis points to 11.34%, the two-week tenor dropped by 3bps to 11.23%, and the one-month KIBOR lost 1bps to 11.16%. The three-month and six-month tenor rates both fell by 1bps to 10.86%, with the six-month KIBOR hitting a 41-month low, last seen at 10.83% on February 22, 2022, according to Arif Habib Limited (AHL).
“The decline in KIBOR comes in anticipation of further rate cut,” said Sana Tawfik, Head of Research at AHL. She noted that a 50bps cut is expected in the upcoming policy, supported by low inflation, a manageable current account, and an improved reserve position. However, Tawfik cautioned that recent floods could lead to food inflation and pressure on the Pakistani rupee due to rising imports, posing risks to the outlook.
The Monetary Policy Committee (MPC) of the State Bank of Pakistan is scheduled to meet on Wednesday, July 30, with market analysts expecting a 50bps cut in the policy rate, which was kept unchanged at 11% in the previous meeting on June 16. The anticipated easing follows a period of stability in the benchmark rate, as markets now price in a more accommodative stance amid improving economic indicators.
Copyright © 2021 Independent Pakistan | All rights reserved
