Oct 17 2018

Turkey sells $2 billion of foreign bonds as currency crisis abates

Turkey sold $2 billion of foreign bonds to yield an annual 7.5 percent in the first such sale since a currency crisis ravaged its financial markets.

The successful sale of the five-year debt brings the country’s foreign borrowing this year to $6 billion, $500 million short of its target for 2018, the Treasury and Finance Ministry said in a statement on its website on Wednesday.

The cost of borrowing for Turkey and other emerging markets is increasing as the Federal Reserve raises interest rates, drawing foreign capital from developing economies and raising concern for financial stability. Turkey’s lira has lost more than a third of its value against the dollar this year due to economic overheating and a political crisis with the United States.

The yield compared with returns of 6.2 percent for a $2 billion sale in April and 5.5 percent for an issue of the same amount in January. This week’s sale was more than three times oversubscribed, the ministry said.

Sixty percent of the bonds were sold to investors in the United States. The sale follows the release from detention last week of U.S. pastor Andrew Brunson, whose internment had prompted President Donald Trump to impose economic sanctions on Ankara.

The spread for the bonds over U.S. Treasuries was 447.5 basis points compared with 266.7 basis points for the January sale.