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Southeast Europe
November 9, 2018 www.intellinews.com I Page 14
Turkey raises €1.5bn from 2026 eurobond yielding 5.25%
Akin Nazli in Belgrade
The Turkish Treasury has raised €1.5bn from a euro-denominated eurobond due February 2026 with a coupon rate of 5.20% and a yield to the in- vestor of 5.25%, it said on November 8 in a written statement.
Initial expectations for the yield stood at around 5.5%, according to unnamed banking sources, Re- uters reported on October 16 citing the Interna- tional Finance Review (IFR).
The spread over market rates continued to in- crease, reaching 456.4bp over Mid-Swaps (MS). Some 35% of the bonds have been sold to inves- tors in the UK, 20% in the US, 14% in Germany and Austria, 7% in the Nordic countries, and 5% in France and Switzerland.
“In the end, pretty successful issue — good tim- ing after the Kazakh issue. The sovereign has now secured $7.7bn in financing from international capital markets this year, as opposed to its $6.5bn annual target — albeit the latter was always ‘soft’ and given it raised more than this last year. The target for external financing next year has been raised to $8bn,” Timothy Ash of Bluebay Asset Management said in a note to investors.
Turkey raised $9.1bn from international markets in 2017 versus the planned $6bn.
“This was the first EUR-denominated placement from Turkey after mid-2017. Pricing appears spot on the curve with closest to the 2026 issue due 2025 yielding 4.865%. Demand for the issue has been strong with order books closing above
€4.5bn since Turkey is another CEE market to offer comparatively high yield for a BB- rated country. Turkey is rated BB/negative by Fitch and Ba3/negative by Moody’s. S&P unsolicited rating for Turkey is B+/stable. Our Buy recommendation for Turkey rests on the assumption that outlook on Turkey will go back to stable next year while current spreads still contain a Premium to the rating,” Gintaras Shlizhyus of RBI Vienna said in a research note.
Economy likely in recession
Turkey’s economy has likely entered recession and it will contract every quarter through mid-2019 as the lira’s slump and rising borrowing costs take their toll on the economy, Moody’s Investor Servic- es said on November 6 in its latest report entitled “Outlook: Sovereigns – Global: 2019 outlook still stable, but slowing growth signals increasingly diverging prospects”.
As monetary tightening in major economies and geopolitical trade disputes continue to undermine investment globally, Moody’s is taking an increas- ingly dim view of the growth prospects of emerging markets like Turkey and Argentina, which “have relatively high exposures to external financing and therefore are the most vulnerable,” Bloomberg cited the latest Moody’s report as saying.
Speaking in the northwestern Turkish city of Bursa, Turkey’s Treasury and Finance Minister Berat Al- bayrak said the successful issuance, which attract- ed around €4.7bn in demand, was a concrete dis- play of the rising confidence of investors in Turkey’s economic policies, according to the news agency.