Pakistan raised a record $3 billion from a junk bond sale after securing credit rating upgrades, taking advantage of hot debt markets.
The nation sold $1.75 billion of five-year debt at a yield of 7.75%, according to people familiar with the matter, who declined to be identified as the information is private. Pakistan also sold $1.25 billion of 10-year notes at a yield of 8.25%, the people said.
The sale attracted orders of almost $6 billion, the finance ministry said in a statement Thursday. Risk premiums offered on the debt tightened about 25 basis points during the sale process, indicating investor demand. Pakistan notes due 2031 were steady at 99.60 cents to the dollar on Thursday.
Pakistan came back to the market after tapping global investors in April for the first time in more than four years in a $500 million private placement. The South Asian nation, which secured an International Monetary fund bailout in 2022 to avert a default, has been taking steps to shore up its finances and rebuild its foreign-exchange reserves.
“This will help in supporting FX reserves and will reduce reliance on risky short term dollar loans and deposit, reducing rollover risks,” said Mohammed Sohail, Chief Executive Officer at Topline Securities Ltd. in Karachi.
The sovereign’s five-year note priced broadly in line with similarly rated emerging-market government bonds sold this year. Egypt, which is rated B at S&P Global Ratings, the same as Pakistan, sold an eight-year note in May that yields around 7.7% currently, data compiled by Bloomberg show.
Rating Upgrades
Moody’s Ratings upgraded Pakistan’s sovereign credit rating last month, following in the steps of S&P, which also raised its credit score in July. The sovereign still have one of the lowest credit scores in Asia at Moody’s B3, six levels below investment grade.
“Over the past three years, Pakistan’s improving economic trajectory has increasingly been recognised through successive sovereign credit-rating upgrades and renewed access to international capital markets,” the finance ministry said in the statement. “Now global investors have reinforced that assessment with billions of dollars of actual capital.”
Bullish sentiment in credit markets in general was also supportive of the deal. Spreads on junk bonds globally are near their tightest in almost two decades as investors seek higher-coupon paying debt to protect returns against rising benchmark Treasury yields.
The average junk bond yield premiums was about 275 basis points on Wednesday, just above a 19-year low touched last week, a Bloomberg index showed.
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