May 21 2019

Turkey asks banks to buy more lira bonds than needed - report

Turkey’s government asked banks last week to buy more local currency bonds than they needed to support its borrowing programme, Bloomberg reported.

A senior government official made the request to so-called market-makers – larger banks who are entitled to purchase bonds outside of regular auction -- Bloomberg said on Monday, citing two people with knowledge of the matter that it didn’t identify.

Turkey’s budget deficit has surged this year after the government embarked on a spending splurge ahead of March 31 local elections. The authorities have also pressured banks to lower borrowing costs for their clients and had reduced the amount of bonds available to investors late last year to help lower interest rates.

It is unclear if banks heeded the request from the official, but the Treasury and Finance Ministry sold two-year bonds last week to yield an annual 24.2 percent, almost 150 basis points below the previous day’s close, the news wire said.

Total borrowing by the government for May was 14.6 billion liras ($2.4 billion) compared with a target of 15.9 billion liras, Bloomberg said.