Recently Pakistan has launched the Sukooks( technically bonds ) in the international market with a coupon rate of 7.95% offering 620 bps above the 7y American Benchmark. However, the bond has been undervalued (B- rating seems fine) but a very high bond risk premium has been adjusted to the discount rate ( around 550 bps spread has been added on base 7yTBUS) .
The Face value is around 102-103 when the same should have been around 110-113 . Now with the US fed going more hawkish there is a almost certain chance of these bonds trading under their par value as spreads tighten up affecting bond prices internationally. The underwriters of this issue severely downgraded the face value beyond the actual value.
GOP raised 1B USD with this issue, despite being oversubscribed, the undervaluation of this bond is of serious concern to GOP which needs to pay the same in US Dollars and earn in PKR .Multiple issues with this bond…