Pakistani Bond Yields Drop to 2-Year Low As Market Expects Another SBP Rate Cut

Pakistani bond yields have declined to a 2-year low, with a 1-year bond now trading at 15.21 percent, a 3-year bond at 12.98 percent, 5-year at 13.17 percent, and 10-year at 12.87 percent. In the last year, bond yields have also dropped by 374-952 basis points from their peak seen on September 2023, Topline Securities said in a brief review. As a result, the benchmark 6-Month KIBOR is also down to a 2-year low of 16.29 percent. This reflects improved market sentiment, driven by a faster-than-expected fall in inflation and a more stable economic outlook. The decline in bond yields is likely to have a favorable effect on equity valuations, as lower yields generally reduce the discount rate applied to future cashflows, thereby increasing the present value. This will lead to a re-rating of stocks, making equities more attractive to investors.