Dollar bonds of Pakistan traded weaker after the fallout in Afghanistan where its US-backed government collapsed over the weekend with Taliban taking over the regime. FT reports fund managers saying that the exodus of refugees from Afghanistan could strain the finances of neighboring countries. “A lot of people are also debating the possibility of formal or informal sanctions on Pakistan for working with the Taliban”, said Uday Patnaik, head of emerging market debt at Legal and General Investment Management. “Investors are concerned over any spillover impact on law and order in Pakistan and ‘whether global forces try to isolate Pakistan’ for perceived support of the Taliban…the earlier decline in the bond value was linked to the expectations of an early monetary tightening on rising inflation by the US Fed rather than the Afghan situation…the recent fall is clearly linked to the emerging situation in Afghanistan and its potential fallout on Pakistan”, said Fahad Rauf, a fixed income asset manager.
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