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While an investment in Government of Pakistan (GoP) securities provide significant benefits, they may also carry a variety of risks in comparison to ordinary bank deposits. GoP securities are NOT bank deposits.
Prior to purchasing your GoP securities, it is advisable that you carefully consider the appropriateness of the transaction, keeping in mind your financial objectives, investment expertise, and risk profile.
It is also important that you carefully consider the possible extent of loss that is inherent to the investment. At the very least you should be aware of the following non- exhaustive list of risks:

• Interest Rate Risk is the most common risk faced by investors in GOP securities since price of the bond and bills change with the changes in market interest rates. For example: If bond’s coupon rate is fixed, there is a risk that bond's price will fall with rising interest rates. Fixed yield on the bond may force the bond’s market price to change to keep pace with changing interest rates. So, if interest rates rise, the bond’s market value generally falls. Under this scenario, if bond is sold prior to maturity, an investor may experience a capital loss. However; If coupon rate on a bond is floating, the yield on the bond may be expected to stay in line with current interest rates, so movements in interest rates generally have little impact on bond's market price and capital value. Generally, bonds and bills with a shorter time to maturity carry a smaller interest rate risk as compared to bonds with longer maturities. Long-term bonds imply a higher probability of interest rate changes, thus carry higher interest rate risk.
• Market and Liquidity Risk is the risk that seller/investor may not be easily able to sell the bond or bill in the secondary market at or close to its real market value in a desired time frame. This is measured by the difference (i.e. spread) between the bid and the offer price. The greater the difference between the bid and offer prices, the greater its liquidity risk as matching bid and offer may take longer to liquidate. Generally, bond is considered liquid if it is traded more frequently in a given trading day.
• Default/Credit Risk is the risk that issuer of the bond or bill will be unable to make interest or principal payments when they are due to be paid. In the event of default, an investor may lose all or some of the income or principle amount invested. Generally rating agencies assess the credit worthiness of issuers and assign credit rating based on their ability to repay its obligations.
• Inflation Risk is the risk that may erode the value of bond or bill’s return under the rising inflationary trends. Inflation risk has greatest effect on the fixed rate bonds which have set interest rates since the date of its inception as compared to the floating rate bonds which are adjusted periodically to match inflation rates, thus limiting investors’ exposure to inflation risk.
• Reinvestment Risk: Timing of reinvestment of returning interest or principal may cause an investor’s return to fluctuate. In a falling interest rate environment, an investor would likely to benefit from higher coupons and longer maturities and will not reinvest his funds into a lower and less favorable interest rate environment. However; under rising interest rates environment, higher coupon and/or short maturities will allow an investor to take advantage of higher interest rates.