The ADB announces rupee-linked bonds worth $200 million for international investors to support the capital market.
The Pak Govt. allows the sale of bonds used to finance the country’s long-term infrastructure.
The ECC had allowed the ADB last month to issue rupee-denominated bonds for investors.
The Asian Development Bank (ADB) recently issued offshore Pakistani bonds in rupees worth $200 million. According to the bank, the rupee-linked bond is intended to serve international investors in support of Pakistan’s local currency and the capital market.
“The ADB will issue bonds denominated in Pakistani rupee in the equivalent of up to USD 200 million to support local currency operations and develop capital markets. Pakistan approved the issuance of Pakistani Rupee-denominated bonds by the ADB”.
For the first time, the Pakistani government allowed the ADB to sell bonds denominated in local currency.
The Pakistani Economic Coordination Committee (ECC) allowed the ADB to issue bonds in rupees for investors last month, while Dr. Abdul Hafeez Sheikh, Advisor to the Prime Minister for Finance and Revenues, chaired the ECC meeting on the ECC’s decision.
Pakistan approves the issuance of #Pakistani Rupee-denominated bonds by the ADB: The ADB will issue #Pakistani Rupee-denominated bonds up to the equivalent of $200 million in order to #support local currency operations and #develop capital markets. @[email protected] @[email protected] pic.twitter.com/AFFcfh0Zog- ADBPakistan (@PakistanADB) August 26, 2020
This was declared by the Ministry of Finance during this period:
“According to the SBP (State Bank of Pakistan) recommendation, the program is to be limited to a maximum of $200 million. The proceeds of the bonds in local currency should be used to finance long-term infrastructure and energy projects in Pakistan”.
It is important to note that the proceeds of the local currency bonds will be used to finance long-term infrastructure and energy projects in Pakistan.
Fitch Solutions forecast an average Rupee 171.15 Rupees against the U.S. dollar in the coming year as investor demand in Pakistan will further reduce demand for the Pakistani currency. The company stated that the rupee fell by about 7.1% against the US dollar last month.
The development bank redeemed a five-year global bond with a $3 billion peg to the US dollar market, which is also part of its capitalization.
said ADB Treasurer Pierre Van Peteghem:
“We looked at the issuance window after the summer and saw an opportunity to extend our global benchmark curve with a new 5-year bond,” said Pierre Van Peteghem.
He also added:
“As most of the immediate action in the dollar market was around the long end, we felt that the middle part of the curve was relatively under-served and decided to capitalize on the pent-up demand”.
“The result was a strong performance with an oversubscribed order book for a $3 billion reference publication that will provide much needed funding to support the ADB’s increased support for its regional members in 2020.
The five-year bond, with an annual coupon of 0.375% and maturing on September 3, 2025, is priced at 99.556% to provide a yield of 15.4 basis points in U.S. Treasury bills maturing in July 2025.
Financial institutions including Bank of America, Credit Agricole CIB, Citi and J.P. Morgan managed the transaction.