Pakistan’s financial markets are witnessing a remarkable rally, with both the bond market and the Pakistan Stock Exchange showing impressive gains. Over the past year, equities have surged by 80 percent, reflecting growing investor confidence and economic optimism.

Pakistan Investment Bonds (PIBs) have been a standout performer, delivering annual gains of up to 40 percent. This impressive performance is attributed to a faster-than-expected decline in inflation and emerging signs of economic stability. According to Mohammed Sohail, CEO of Topline Securities, bond yields have decreased by 400 to 1000 basis points over the past year.

In October 2023, the yield on the 1-year bond was 23 percent, while the 3-year, 5-year, and 10-year bonds offered yields of 19 percent, 17 percent, and 16 percent, respectively. Today, these yields have significantly declined to 13 percent for the 1-year bond, and 12 percent for the 3-year, 5-year, and 10-year bonds.

Pakistan’s dollar-denominated Eurobonds have also shown substantial improvement. Yields have fallen from 20-40 percent last year to approximately 9-11 percent today. This sharp decline in yields presents an opportunity for the government to access commercial borrowing from international markets under more favorable terms, according to Sohail.