Asian Development Bank issues $200 million worth rupee-linked bonds for Pakistan

By: Gannicus Oliver
Gannicus Oliver
Gannicus Oliver is an author, consultant, digital economy enthusiast and investor. He boasts over three years of bonds, real… read more.
on Aug 31, 2020
  • ADB announces rupee-linked bonds worth $200 million for international investors to support the capital market.
  • Pak Govt. is allowing selling bonds that are used for financing long-term infrastructure in the country.
  • The ECC had allowed the ADB to issue rupee-denominated bonds for investors last month.

The Asian Development Bank (ADB) recently issued offshore Pakistan rupee-linked bonds worth $200 million. According to the Bank, the rupee-linked bond will be for international investors to support Pakistan’s local currency and capital market.

ADB tweeted:

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“ADB will issue bonds denominated in Pakistani rupee up to a value of $200 million equivalent to support local currency operations and develop capital markets. Pakistan approved ADB’s issuance of Pakistani rupee-linked bonds.”

Pakistani Government, for the first time, allowed ADB to sell bonds linked to the local currency

Pakistani Economic Coordination Committee (ECC) allowed ADB to issue bonds in Rupees for investors last month during the time Dr. Abdul Hafeez Sheikh, Advisor to Prime Minister on Finance and Revenue, had chaired the meeting of ECC when the decision was taken.

The finance ministry stated this during that time:

The program, according to the recommendation of SBP (State Bank of Pakistan), shall be restricted to a maximum of $200 million. The local currency proceeds of the bonds shall be used for financing long term infrastructure and energy projects in Pakistan.”

It is essential to know that the local bonds’ proceedings will be channeled towards financing long-term infrastructure and energy projects in Pakistan.

Fitch Solutions forecasted rupees to an average of 171.15 against the United States Dollars in the coming year as demand by investors in Pakistan will continue to lower demand for Pakistani’s currency. The company stated that the rupee dipped around 7.1% against the United States Dollars last month.

The Development Bank put back a five-year global bond pegged at $3 billion in the U.S dollar market, which is also part of its capital resources.

ADB Treasurer Pierre Van Peteghem said:

“We looked at the post-summer issuance window and saw an opportunity to add a new 5-year to our global benchmark curve”

He also added:

With most of the immediate action in the dollar market situated around the long end, we felt that the middle part of the curve was relatively undersupplied and decided to capitalize on pent-up demand”

He continued,

The result was a strong one with an oversubscribed order book for a $3 billion benchmark print that will provide much-needed resources to support ADB’s increased assistance to its regional members in 2020.”

The five-year bond, which has a coupon rate of 0.375% annually with a maturity date of 3rd of September 2025, is priced 99.556% to yield 15.4 basis points in the US Treasury notes, which is due by July 2025.

The financial institutions such as Bank of America, Credit Agricole CIB, Citi, and J.P. Morgan managed the transaction.

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