Sovereign bond update

Pakistan’s international bonds faced selling pressure on Monday, and Uzbekistan’s bonds also weakened as investors in emerging markets were prepared to deal with the impact of the crisis. Afghanistan.

The US-backed government in Afghanistan collapsed over the weekend as Taliban militants occupied the capital Kabul, after the Islamic organization had already occupied most of the country.

Refugees may be exodus Afghanistan The fund manager said that this may strain the finances of neighboring countries, while also worrying that the West may retaliate against Pakistan and provide a safe haven for the Taliban.

Pakistan’s dollar-denominated bonds fell by about 1% to just over 100 cents, and some longer-term bonds fell to their lowest prices in nine months. The yield on the 10-year bond issued in April this year was contrary to bond prices, rising by about a quarter of a percentage point to about 7.3%.

Since mid-June, the country’s 8.8 billion U.S. dollar bonds have now fallen by about 4%.

“There are some concerns driving this move,” said Uday Patnaik, head of emerging market debt at Legal and General Investment Management. “One is the refugee crisis-obviously Pakistan will be affected, and it will be costly.

“Many people are also debating whether it is possible to impose formal or informal sanctions on Pakistan’s cooperation with the Taliban. Because of these problems, we have been underweight in the past few months, but like others, we did not expect it to happen so soon. “

Even before the recent sell-off, Pakistan already had some of the highest bond yields among emerging economies, which were not considered to be directly at risk of default. Its debt was rated as Grade B by Standard & Poor’s and Fitch, and entered into Junk Grade 6.

Patnaik stated that LGIM has also recently reduced its holdings of bonds issued by Uzbekistan and Tajikistan in recent months. On Monday, the price of Uzbekistan’s USD bonds maturing in 2030 fell by about 25%.

The focus of the market has fallen on Afghanistan’s neighbors, because the country itself does not have any international trade debts, and most of the funds from the dismissed government come from Western governments and other donors such as the World Bank and the International Monetary Fund.

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