Page 85 - TURKRptJun19

versus the current market level of 19.50%. With its year-end forecast for 10- year bonds at 16.0%, Deutsche now saw a 7.2% excess return by year-end (25.7% return in local currency vs an 18.5% FX implied yield return by year- end). This was the highest expected return for a 9-month time period across all emerging markets that Deutsche had seen in its modelling in more than 12 months. Meanwhile, a note from Deutsche added that fiscal and economic developments, recapitalisations in the country’s banking sector and changes in portfolio and dollar FX deposit flows were all key things to watch. “Without improvements on sentiment, it will be difficult to see the reversal of portfolio flows despite the now arguably cheap valuation in local assets,” Wietoska said.
Ideal world if... There might indeed be an ideal world if we could rely on authoritarian regimes’ official data and avoid all political and geopolitical risks, and if the regimes in question refrained from manipulating their currencies and interest rates.
Turkey’s Treasury on May 14 tapped its two-year benchmark bond at a yield of 25.31%, up nearly six percentage points since a similar issue in March. The day also saw Ankara’s dollar-denominated sovereign bonds gain, supported by some strengthening in the Turkish lira (TRY), which, however, remained around 13% down against the USD in the year to date. The government’s 2030 bond moved up by 1.3 cents in the dollar while most other bonds rose between 0.2 and 0.9 cents, Tradeweb data showed. The TRY last month fell as far as 6.2460 to its weakest rate versus the dollar in more than seven months, partly on news that officials had decreed there must be a rerun of the Istanbul election won by the opposition. The depreciation was battled by state banks, whch sold billions of dollars to support the currency. The strategy was still being pursued during trading on May 14. Total foreign currency sales to the market by the public lenders on May 13 amounted to $1bn, sources told Reuters. In one week, the banks sold a total of $4.5bn, while the central bank suspended repo auctions and took additional backdoor liquidity steps. The government is putting pressure on all aspects of the state to try to support the lira before the Istanbul poll is re-run on June 23, Jason Tuvey, senior emerging markets economist at Capital Economics, was quoted as saying by Reuters. “It is only so far that the [public] banks can do this [intervention activity on the forex market] given they’ve already drawn down their foreign currency assets quite a lot over the past year,” he said.
8.5.1 Fixed income - govt funding plan
Domestic Government Debt Auctions and Borrowing Program
(TRY bn)
Total
Public
Yield
Auction
Maturity
Paper
Bids
Sold
B
S
(%)
19-Mar
12/11/2019
266-day Zero Coupon (re-open)
3.9
2.8
0.6
0.6
19.97
19-Mar
01/10/2024
5-year CPI-indexed semi-annual (re-open)
3.2
2.6
0.5
0.5
3.89
26-Mar
08/12/2020
2-year fixed semi-annual (benchmark) (re-open)
3.8
3.3
1.8
1.8
19.39
26-Mar
08/06/2025
6-year floating semi-annual (re-open, 6.)
1.7
1.5
0.5
0.5
19.78
22-Apr
04/21/2021
2-year fixed semi-annual (benchmark) (new)
4.6
3.2
1.0
1.0
22.18
13-May
05/13/2020
364-day Zero Coupon (new)
10.1
7.2
1.3
1.3
26.12
13-May
01/10/2024
5-year CPI-indexed semi-annual (re-open)
4.6
3.5
0.7
0.7
4.25
14-May
04/21/2021
2-year fixed semi-annual (benchmark) (re-open, 2.)
5.7
4.5
1.3
1.3
25.31
14-May
08/06/2025
6-year floating semi-annual (re-open, 6.)
3.9
3.1
0.5
0.5
21.38
85 TURKEY Country Report June 2019 www.intellinews.com