Page 73 - TURKRptOct19

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“Rumours in London”: Turkey testing waters for new eurobond. The investor community in London is reportedly talking about a possible new eurobond issue on the way from Turkey.
Timothy Ash, an emerging markets sovereign strategist at Bluebay Asset Management, referred to the speculation on October 1 in an emailed note to investors.
“Rumours in London of a new Eurobond issue—guess the Turks will want to market their new [medium-term program released on September 30] to investors. The challenge there will be explaining its consistency, i.e. How can Turkey get to 5% growth [in 2020], with falling inflation, a real appreciation in the TRY, with the current and fiscal deficits remaining modest?” Ash wrote.
Turkey will on November 7 redeem $1.5bn worth of 10-year paper that pays a 7.5% coupon, according to data from the finance ministry.
At its latest eurobond auction held in July, Turkey’s Ministry of Treasury and Finance sold $2.25bn worth of US dollar-denominated eurobonds due 2024 at a coupon rate of 6.35% and a yield to the investor of 6.45%.
The spread over US Treasury paper rose to 470bp from the 454bp seen in the previous eurobond sale held in March.
The amount of funds that have been raised on the international capital markets by the Turkish Treasury in 2019 stands at $8.7bn.
Turkey’s overall foreign currency debt sales, including sukuk sold to local and foreign investors, gold-backed securities issued on the domestic market and private placements to shore up state banks, has so far this year jumped to a record high of around $20bn compared to figures below $10bn seen in 2017 and 2018, Bloomberg reported.
The eurobond sale that followed a tiny $150mn issue from state-run Vakifbank suggested that the Erdogan administration had managed to revive its foreign financing channels that were temporarily halted after a series of scandals. The first of those saw Turkish officials shutting down the offshore lira swap market in London prior to the March 31 local elections as they attempted to ensure Turkey’s currency did not slide severely in advance of voting.
The price of the USD-denominated 2030 paper, which pays a coupon of 11.875%, was down 0.11% d/d to 137 on October 1 while the 2034 paper, which pays a coupon of 8%, was up 0.23% d/d to 110.
Some 24 of Turkey’s 25 various outstanding USD-denominated sovereign eurobonds (the exception is the November 2019 eurobond maturing next month) and seven of its eight EUR-denominated Eurobonds (the exception is the 2020 paper which was slightly down on an annual basis but stayed positive on a monthly basis), along with each of the four USD-denominated international sukuk bonds have gained value on month-on-month and year-on- year bases, Is Invest’s daily fixed income bulletin showed on October 1.
Turkish corporates’ eurobonds, meanwhile, have also delivered gains in the past month and year.
For the sake of comparison, the Montenegrin finance ministry on September
73 TURKEY Country Report October 2019 www.intellinews.com