Strong debt reduction draws more investors

ISTANBUL - Reuters

High buildings rise in Levent, Istanbul’s financial center. Economists say Turkey may see a rating upgrade this year. DAILY NEWS photo, Emrah GÜREL

Turkey has almost completed its heavy borrowing programm for January, paying less than expected as a recent increase in yields and the country’s relatively robust finances attracted investors.

Turkey has applied tight fiscal policies since a financial crisis in 2001 and its debt burden is now about half the eurozone average relative to economic output. The treasury borrowed around 10 billion lira ($5.6 billion) through four debt auctions in the first two days of this week, raising 2.3 billion lira from public institutions and 7.7 billion lira from the domestic markets.

Credibility rising

“The continuous decreasing trend of Turkish indebtedness rises Turkey’s credibility in the eyes of investors, in a global environment where fiscal policies remain problematic,” said Sektan Özcan, assistant general manager at Odeabank.

The Treasury’s January borrowing target is 11.6 billion lira from domestic markets against domestic debt redemptions of 13 billion. It will complete this month’s programme on Jan. 15 when it plans to issue a 15-month zero-coupon bond.

“The recent increase in bond yields supported the demand for Turkish bonds. In January, the Treasury booked 4.2 billion lira in privatization receipts. So it can even borrow less than it announced earlier,” said Haluk Bürümcekçi, chief economist at EFG Istanbul.

Turkish bond yields had risen slightly since mid-December as investors sold to lock in profits in thin end-of-year trade.

On Jan. 8, the treasury borrowed 1.2 billion lira through the two-year fixed-coupon bond maturing on Jan. 7, 2015 at a yield of 6.10 percent, below a forecast of 6.18 percent. The paper is expected to be the new two-year benchmark bond.

It also borrowed 1.4 billion lira through the tap of the ten-year fixed-coupon bond maturing on Sep. 14, 2022 at a yield of 6.75 percent, below a forecast of 6.8 percent. The treasury borrowed $1.5 billion through its 10-year dollar-denominated Eurobond due March 2023 at 160 bp over U.S. Treasuries, IFR said. Fitch upgraded Turkey to investment grade in early November, and investors expect a second rating agency to follow suit. “I would expect the Turkish treasury to do at least $6-7 billion this year in the Eurobond market, more if pricing remains attractive,” wrote Timothy Ash, head of emerging markets research at Standard Bank.