Tanwirovich
6.1K posts

Tanwirovich
@tanwirovich
EM sovereign debt, macro. Follows, RTs, likes = reminders. Tweets own opinion.

WATCH IN FULL: President Donald J. Trump's interview with @BretBaier in Beijing



Pakistan's Panda Bond Victory Let's dig in. Finance Minister Aurangzeb returned from Beijing this week calling Pakistan's inaugural Panda Bond a "new chapter" in economic ties with China. The markets agreed. The $250 million, yuan-denominated instrument was five times oversubscribed. What he did not mention is that the guarantees underwriting the bond totalled $285 million, which is $35 million more than the bond itself. Investors were not betting on Pakistan. They were, quite literally, covered beyond the principal. Pakistan could not access China's investment-grade-only bond market on its own. Its sub-investment-grade credit rating barred entry. ADB and AIIB together covered 95 percent of the principal and any accrued interest, paid directly to bondholders, at a combined guarantee fee of between 0.8 and 1.25 percent charged back to Islamabad. The oversubscription reflects appetite for AAA-rated multilateral paper. It reflects nothing about Pakistan's standalone creditworthiness in Beijing. China already holds roughly 22 percent of Pakistan's total external debt. Adding yuan-denominated bonds to a balance sheet already heavily weighted toward Chinese bilateral and commercial exposure is not diversification. It deepens the same concentration while appending a new currency risk: the rupee has lost substantial ground against the renminbi over the past decade, and yuan-denominated obligations grow costlier in real terms every time it does. The bond was also placed privately on the interbank market, offered only to qualified institutional investors. There was no public price discovery. Nobody knows what Pakistan's unsupported borrowing rate in Chinese capital markets actually is, because it has never been tested. On scale: $250 million against an external debt load exceeding $96 billion is arithmetic noise. The full $1 billion program, once complete, covers just over one percent of total obligations. Planning Minister Ahsan Iqbal, while approving the guarantee structure, warned that new foreign loans should not be signed without rupee cover in the PSDP, cautioning that delays could produce another circular debt crisis. His cabinet signed this one the same week. The "reform-minded technocrat" framing that follows Aurangzeb deserves scrutiny on its own terms. For six years he ran the largest bank in Pakistan and delivered lower returns on equity, higher cost-to-income ratios, and dividends that lagged both the pre-Aurangzeb period and every comparable peer institution. HBL's sharpest performance recovery came after he left for Q-block. A man whose primary credential is banking, and whose banking record is one of value erosion, now manages the sovereign balance sheet. The Panda Bond he is celebrating, a $250 million instrument requiring $285 million in external guarantees to get in the room, is consistent with that record. The guarantee fees go to multilateral banks, the interest goes to Beijing, the debt stays in Islamabad, and the minister who arranged it spent six years doing the same thing at a smaller scale, this is not a new chapter, it is the same elite driven extraction model Pakistan has been employing since 1958.


The UAE tried to persuade Saudi Arabia and Qatar to take part in a coordinated military response to Iran’s airstrikes and was left frustrated when they refused, sources say bloomberg.com/news/articles/…






















