Pakistan bonds fell more than 13 cents in the frontier market on Monday, as US President Donald Trump showed no signs of backing away from sweeping tariffs.
It was the single biggest decline for Pakistan bonds across many maturities since Russia’s full-scale invasion of Ukraine shook markets in early 2022.
Hard-currency debt issued by smaller, riskier, emerging markets suffered a sharp selloff on Monday, with yields across many of the bonds soaring into double digits.
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The turmoil could exacerbate existing funding challenges in countries such as Angola, Gabon and Senegal.
“The macro volatility hit EM credit hard this week, with a clear risk-off tone meaning HY underperformance, wider spread sand lack of liquidity,” said James Wilson at ING.
Longer-dated bonds issued by so-called frontier market governments such as Pakistan and Sri Lanka, both textile exporters slammed by the U.S. tariffs, were down more than 6 cents by 1500 GMT, Tradeweb data showed.
Commodity exporters also felt the pain, with international debt issued by oil exporters Angola and Gabon, as well as copper producer Zambia, all suffering losses of around 4 cents.
“The dramatic price moves reflect the double whammy of US President Trump’s reciprocal tariffs on the rest of the world and OPEC-induced lower oil prices,” Stuart Culverhouse of Tellimer said in a note to clients.
After Trump’s initial tariff announcement on Wednesday, there was a sharp divergence in the performance of hard-currency bonds issued by emerging market nations.
Those with lower credit ratings – known as high yield – suffered the biggest losses, while debt from investment-grade nations outperformed, Citi said in a note to clients.
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Now, yields on benchmark international bonds in nearly all Sub-Saharan African countries – bar relatively highly rated Namibia and the Seychelles – have soared above 10%, according to Tellimer’s Culverhouse.
Double-digit yields are widely seen as an indication of unsustainable borrowing costs.
