New York February 27 2024: BofA raised it recommendation for Pakistan dollar bonds to overweight from marketweight, citing falling political uncertainty after the elections and possible rating improvements.
“We upgrade Pakistan to overweight from marketweight with a fair value range of $70-75 in the longer end of the curve,” strategists lad by Vladimir Osakovskiy wrote in note.
“The elections-related political uncertainty Is falling, as remaining policy risks are largely the same as last year and have already been addressed once through the breakthrough with the IMF”.
“We initiate a trade buy Pakistan notes due in 2026 with a target of 83, stop loss of 69”. The bonds are trading at 77 currently.
“The likely repayment of $1bn ’24s maturing in April will likely provide support to the whole curve, but mainly bring 25′-26′ into the spotlight of market attention, likely forcing further bull-steepening”.
“The longer end may benefit from likely progress with the new IMF program, as the market may start to price in gradual rating improvements, as already hinted at by S&P”.
“We note remaining political tail risks as the market may closely monitor Cabinet appointments, evaluating key members on their ability to deliver on IMF conditions.
