Pakistani bond yields hit 2-year low amid rate cut expectations

ISLAMABAD: Pakistani bond yields have fallen to a 2-year low, with the 1-year bond now trading at 15.21 percent, the 3-year bond at 12.98 percent, the 5-year bond at 13.17 percent, and the 10-year bond at 12.87 percent.

Over the past year, bond yields have also fallen by 374-952 basis points from their peak seen in September 2023, Topline Securities said in a brief review.

As a result, the benchmark 6-month KIBOR also fell to a 2-year low of 16.29 percent.

This reflects improved market sentiment, driven by a faster-than-expected decline in inflation and a more stable economic outlook.

A decrease in bond yields is likely to have a favourable effect on equity prices, as lower yields typically lower the discount rate applied to future cash flows, thereby increasing present value. This will reclassify the stock, making the equity more attractive to investors.