Türkiye on track for investment grade rating, says Pimco

LONDON

Pimco has been wading into Türkiye’s bond market, betting that President Recep Tayyip Erdoğan’s commitment to a sweeping economic overhaul has set the country on a path to regaining its investment grade credit rating, the Financial Times has reported.

The California-based firm, one of the world’s biggest bond fund managers, has been buying Türkiye’s lira-denominated debt since the second half of last year, prompted by Erdoğan’s change of economic policy after his victory in May’s general election last year, the daily said.

“Interest rates have risen substantially, fiscal policy has tightened... policymakers encourage locals to invest back into the lira and away from U.S. dollars... these efforts are working,” the daily quoted Pramol Dhawan, who heads the firm’s emerging markets team, as saying.

Pimco was “very constructive” on domestic Turkish assets, he added.

Such an upgrade could happen “within the next five years if everything goes to plan,” Dhawan said.

Last week, Moody's revised Türkiye’s outlook from stable to positive, citing a “decisive change in economic policy.”

The company affirmed Türkiye’s rating at “B3,” six notches below investment grade.

On Jan, 17, it affirmed the Baseline Credit Assessments (BCA) and long-term local-currency deposit and long-term issuer ratings of all 17 Turkish banks that it rates and changed the outlook on these ratings to positive from stable.

Türkiye is likely to attract foreign capital once again, helping to stabilize the lira, which is a necessary precondition for bringing down inflation, Dhawan told the Financial Times.

Central Bank Governor Hafize Gaye Erkan last week met with investors at an event organized by JP Morgan in New York.

One person who attended the event told the daily that Erkan and Finance Minister Mehmet Şimşek, who appeared virtually, “delivered a very credible and encouraging update on the impact of their reforms and goals looking forward.”