Selling in Turkish assets on Thursday was not limited to the currency: Government bonds denominated in both lira and dollars took a fresh blow.
On the local fixed income market, yield on Turkey’s benchmark 10-year paper jumped as much as 60 basis points (0.6 percentage points) to 19.67 per cent. That left it close to the record high of 20.09 per cent that was hit during a day of acute turbulence on Tuesday.
Turkey’s dollar-denominated debt has tended to be more stable. Despite market ructions, Turkey has been able to tap the foreign capital markets twice this year — once in January and another time in April. In each case it raised $2bn by selling 10-year debt.
Both of those 10-year bonds, however, have faced more pressure in recent days.
The gap in yield between the one issued in January and an equivalent 10-year US Treasury climbed to 462 bps from 450 bps on Wednesday. It was issued at 267 bps. Meanwhile, spread on the one issued in April climbed 11 bps to 474 bps. It was issued at 337 bps.
Turkey’s debt is rated at speculative-grade by S&P Global, Moody’s and Fitch. Fitch reduced its rating on Turkey as recently as July, while Moody’s is reviewing Turkey for a downgrade after making a cut in March. S&P reduced its rating in May.
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