The latest Pakistani Eurobond has attracted unnecessary criticism in the media mainly on two counts: the 8.25 percent yield on the paper is high (the yield on the Eurobond issued in April 2014 was also 8.25 percent) and second, the response to the latest issue was lukewarm – $1 billion – when compared to the $6 billion bids received in 2014.
In 2014, the world’s economic outlook was very positive and financial markets around the world were expecting that the US interest rate that was close to almost zero percent would remain the same for at least one year or may be for a longer period of time. This time round there are clear signs of hike in the Fed interest rate. So, how can we get a better interest rate on the latest Eurobond? The international financial markets’ future expectation of the Fed interest rate hike is reflected in 8.25 percent yield that we have accepted for our latest Eurobond. Why did investors not show that much exuberance for the Pakistani Eurobond this time as they did in 2014? This is because of uncertainty in international financial markets these days following a slowdown of the Chinese economy. But despite the uncertainty, the Eurobond is a big success for us and a vote of confidence in our economy.
Ejaz Ahmad Magoon
Lahore