Foreigners buy debt worth $925mln in FY21

KARACHI: Foreign investors parked $925.28 million in local currency debt securities in this fiscal year (July-June), mostly in pursuit of higher yields, State Bank of Pakistan (SBP) data showed on Tuesday.

The appetite for Pakistan’s debt securities showed signs of recovery as the combined inflows in the Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs) from the foreign investors were higher than the outflows.

The foreign investors pulled $901.05 million out of Pakistan’s short-term and long-term papers during July 01, 2020, to June 21, 2021. Foreigners bought net $24.22 million in government securities in the current fiscal year to date.

A higher return on the local debt securities, especially PIBs is the biggest attraction for the global investors as the interest rates in the United States and Europe are at zero percent.

Analysts said the interest rates and the stability in the exchange rate led to the increase in the size of the foreign investment in the government securities. These two factors are favourable for carry trades.

The 10-year Pakistan Investment Bonds are now trading near 10 percent. The rupee, which is under pressure these days, is expected to be stable in the medium term.

Some analysts see interest rates to rise towards the last quarter of 2021.

With global commodities going up (especially oil), it seems difficult for the central bank to keep interest rates flat in the long run.

The hot money inflows surpassed outflows in June after several months. Foreigners purchased net $71.89 million in MTBs and Pakistan Investment Bonds so far this month.

The State Bank of Pakistan’s data showed that foreign investors put $669 million in MTBs and $255.62 million in PIBs in July-June FY2021, while taking $879.50 million and $21.55 million out of MTBs and Pakistan Investment Bonds , respectively in the same period of this year.

Debt markets saw an outflow of $389 million in 11 and a half months of FY21 while the equity market witnessed a net outflow of $413 million during the period. Foreign investors redeemed $210 million worth of investments treasury bills during the period.