Page 68 - TURKRptJul19

offers an alternative to low-yield government bonds in Europe,” Marcelo Assalin of NN Investment Partners told Reuters. It has been a sensational couple of weeks in emerging markets, with money flooding in and asset prices climbing ever higher, but the influx of new money is driving down yields further than some investors feel is justified, Global Capital reported in a separate story entitled “EM investors fear bond ‘euphoria’ driven by ‘wrong reasons’”. “The backdrop is really remarkable just now... Things are rallying, cash is coming in but we’re struggling to find new and exciting names where we can deploy cash. Most of this week’s deals ended up tightening beyond where we were comfortable,” one unnamed emerging markets portfolio manager told the publication. Now that the latest municipal elections have been left behind, Turkey is embarking on a journey of over four years without elections and it will be sought after by international investors and foreign capital, JP Morgan Securities Chairman Winfried Bischoff told Turkey’s state-run Anadolu Agency on July 3. “If Turkey operates the S-400 and the F-35, it would place the lives of all future American and allied F-35 pilots at risk... President Trump ought to side with the men and women who fly these planes, not a Turkish autocrat desperate to maintain his grip on power,” Eliot Engel, chairman of the House Foreign Affairs Committee, said on July 1 in a written statement. In addition to baseless assumptions of “a journey of over four years without elections” given the solid snap polls expectations sooner or later but not later than 12 months, Turkey’s official macro figures are also perfect since Yinal Yagan, a former official of the Energy Ministry’s Directorate of General Mining who is known to have been close to Erdogan’s son-in-law and finance minister Berat Albayrak while he served as energy minister, was appointed to the management of the Turkish statistical institute (TUIK) in October. Bischoff said on June 28 at a conference held by Turkey’s Sabanci University that he believes interest rates in Turkey will fall as inflation is falling, pro-Erdogan Yeni Akit, a hardcore Islamist paper, reported.
As part of its 2019 external borrowing programme, Turkey’s Ministry of Treasury and Finance has mandated BNP Paribas, Citigroup and HSBC in order to issue US dollar-denominated eurobonds due 2024, the ministry said on July 2 in a written statement. Turkey has also launched on July 2 bookbuilding to sell the papers, with the initial price guidance set at 6.65%, unnamed bankers told Reuters on July 2.“Turkey 10Y in dollars is up 8 price points since mid May, rallying 120bps in yield, to just over 7%. And given the limited FX reserve buffer, Turkey could do with some additional FX liquidity. Hearing lots of unsubstantiated rumours of potential management changes at the CBRT - or names being touted to replace incumbent governor Cetinkaya. Some of the names being mentioned seem to be wishful thinking/pie in the sky. One such name was Ceyla Pazarbasioglu, the ex-IMF official, and former BRSA official. This would be totally brilliant if true, and could be worth another 100bps+ off Turkey's borrowing costs,” Tim Ash of Bluebay Asset Management said on July 2 in an emailed note to investors. The Turkish Treasury last sold $1bn worth of 10-year US dollar-denominated eurobonds at a coupon rate of 7.625% back in March (see table below) before the Erdogan government shut down the lira swap market in London with the aim of defending the local currency prior to the March 31 local polls. Consequently, the Turkish Treasury and corporates have lost their access to the eurobonds market for a while.
Turkish state's Vakifbank sells $150mn of 5-year eurobonds. Turkish state-run lender Vakifbank has completed the issuance of $150mn worth of 5- year eurobonds via private placement to qualified institutional investors abroad, the lender said on June 25 in a stock exchange filing. The lender did not provide information on the cost of the paper. Also on June 25, Vakifbank said in a separate filing that it has repurchased a nominal $5mn of its eurobond maturing in 2022 (with ISIN code XS0849728190). On June 21, the lender said in a filing that Fitch Ratings had affirmed its long-term foreign currency rating at B+/Negative.
On June 24, Global Capital reported that Turkish President Recep Tayyip Erdogan’s Istanbul revote defeat could open the bond issuance window
68 TURKEY Country Report July 2019 www.intellinews.com