THE government`s latest Eurobond issue has raised as many questions as it has dollars. The exercise was successful to the extent that it met the target for raising the required amount of dollars, but participation was far weaker than it was during last year`s bond exercise, and the yield did not come down despite higher reserves, improved security, rising growth and controlled fiscal deficit. In fact, given that the yield on the 10-year US Treasury bond has fallen since the last Pakistani bond, the spread between our yields and the international benchmark has actually gone up.

The level of interest also fell from the last such exercise, when the government set a target of $500m, and attracted bids worth $8bn.

This time the target was the same, but the bids attracted were just about $1bn.

Pakistan`s 10-year bonds floated in April 2014 traded on a premium of more than 4pc on Monday, unusual given they are still nine years away from maturity. Earlier this year, the premium had shot up to 10pc. The latest bonds too are expected to command a significant premium in the market, suggesting that the government may have overpriced them. Why was there such haste to hold this exercise given that reserves are at a comfortable level, and global markets are still jittery over China and the possibility of a hike in US interest rates? The finance team should explain the matter clearly. Overall, the bond exercise can be said to be narrowly successful given that the targeted amount was raised, but it appears investors remain wary of the government`s story of a significant improvement in the economic situation; these questions prompted the government to highlight during its road shows that another IMF programme next year might well be an option for Pakistan. Clearly, the improvement in the reserve coverage ratios is not enough to assuage the concerns of lenders, and the government ought to be careful about overselling these asitssuccessstory.