Turkey garners vigorous demand in latest international bond sale

Turkey garners vigorous demand in latest international bond sale

Investors snatched up Turkish debt in the country’s latest international bond sale, underlining the dramatic improvement in sentiment after this summer’s currency crisis.

As Financial Times writes in an article "Turkey garners vigorous demand in latest international bond sale", Turkey raised €1.5bn in the sale of euro-denominated paper that matures in February 2026. The new issue was sold at a yield of 5.25 per cent, according to an official announcement. The country received orders of more than three times the size of the actual sale in a sign of robust demand.

The country has now tapped the foreign debt market twice since its currency collapsed in August to an historic low. Last month it issued a five-year dollar-bond with a yield of 7.5 per cent, or 4.48 per cent above an equivalent US Treasury. It sold dollar bonds two other times this year, both times at lower spreads. Turkey has now raised roughly $7.7bn this year in international bond sales at current exchange rates.

More than a third of the bonds in the latest sale were sold to investors in the UK, while a fifth went to US investors. Only 6 per cent were sold to investors in Turkey.

Turkey’s financial markets faced severe ructions this summer amid worsening relations with the US and concerns that its economy was overheating. In August, the lira reached an historic low of TL7.2149 to the dollar — down by 47.5 per cent since the end of 2017.

The situation has improved, however, since then. A sharp rate hike by the central bank in September instilled more confidence in investors that action would be taken to cool inflation, which has jumped above 25 per cent. And the release of US pastor Andrew Brunson has led to an improvement in US-Turkish relations.

The lira has since cut its losses for the year to about 30 per cent.

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