Pakistan’s international bonds rally after S&P upgrade, easing default fears

Pakistan’s international bonds surged in the range of 0.2% to 4.4% on July 25, following S&P’s upgrade of the country’s credit rating to ‘B-’ with a stable outlook.

An analyst at Arif Habib Limited said the upgrade reflects waning default risks and macroeconomic stabilization, marking a return to the ‘B-’ rating for the first time since July 2022.

The data shows a notable price appreciation across sovereign instruments, particularly the 30-year bond maturing in March 2036, which advanced 3.9% on daily basis and 12.8% year-to-date, closing at 87.80.

Its counterpart maturing in April 2051 posted similar momentum, gaining 4.4% in a day and 11.1% YTD.

Shorter-duration bonds also rose, with the five-year note maturing in April 2026 edging up 0.7% on the day and 6.1% YTD.

Meanwhile, the 10-year international bond issued in December 2017 traded at 98.02 with a 7.8% yield to maturity, up 1.5% in a day.

Yields on Pakistan’s sovereign Eurobonds also surged across all maturities this week. The 2025 Eurobond climbed 36 basis points from last week to 7.0%, marking a 95-basis-point increase for the month.

The 2026 note jumped 54bps on the week and a staggering 188bps from June, settling at 6.1%.

The 2027 bond, now yielding 8.0%, rose 61bps week-on-week.

Longer-tenor bonds also saw notable gains. The 2031 Eurobond stood at 9.0%, up 55bps from last week, while the 2051 issue reached 10.3% after a 37bps weekly rise.

The 2036 bond now yields 10.0%, gaining 38bps on the week.

The Pakistan Global Sukuk Program also saw bullish movement, with its seven-year issuance maturing in January 2029 gaining 2.3% on the day and 8.8% YTD. Its current price stands at 100.17, reflecting investor appetite for shariah-compliant instruments amid regional demand.

Analysts attribute the gains to increased stability in Pakistan’s foreign exchange reserves and progress on fiscal reforms.