Turkey returns to int’l debt market with $2b Eurobond

ANKARA, Oct 17, (RTRS): Turkey saw strong demand in its return to the international bond market on Wednesday, with a $2 billion Eurobond threetimes oversubscribed, in a higher-yielding issuance seen as a test for restoring investor confidence following a currency crisis.

Turkey’s lira has fallen some 35 percent this year, hit by concerns about President Recep Tayyip Erdogan’s grip on monetary policy and a diplomatic rift with the United States.

But there are some signs of recovery. A Turkish court last week freed a US evangelical Christian pastor who had been on trial on terrorism charges. The preacher, Andrew Brunson, had been at the heart of the diplomatic stand-off and his return has helped push the lira to its firmest in two months – since the height of the crisis.

Turkey’s Treasury said it priced the five-year Eurobond at 7.5 percent. That compared to the 6.2 percent it paid on a 10-year Eurobond in April and the 5.2 percent on another 10-year Eurobond in January.

It also had to pay a higher premium over US Treasuries, with the spread rising to 4.475 percentage points from 2.667 percentage points in January. The sale was another sign of “normalisation” for Turkey, said Timothy Ash of BlueBay Asset Management.

Meanwhile, Turkish economic growth is expected to fall short of sharply lowered government forecasts this year and next, with a recession now likely in the coming six months, a Reuters poll showed, underscoring serious damage from a currency crisis.

The lira has collapsed nearly 40 percent this year, pushing up the price of everything from food to fuel and sending annual inflation to nearly 25 percent, its highest in 15 years.

Sparked by concerns about President Erdogan’s control over monetary policy, the sell-off has prompted the central bank to hike rates aggressively, although not enough to reverse the lira’s losses. Investors are now worried about slowing output and the potential impact on the banking sector.