Feb 19 2019

Turkey leans on state-run banks to sell two-year bonds

Turkey leaned on its state-run banks to borrow almost 10 billion liras ($1.9 billion) at auctions of domestic debt on Tuesday.

The Treasury and Finance Ministry sold 3.34 billion liras of two-year lira bonds to state institutions, a record amount. They had bought none of the bonds in the last two-year sale in January.

The government sold a further 440 million liras in non-competitive bids to market-makers, who also include government-run banks.

Turkey is seeking to lower the cost of borrowing by selling more local debt to public institutions and by offering larger amounts of foreign currency bonds. The policy of seeking to control domestic interest rates by cutting back on competitive sales has drawn criticism from prominent economists including former Central Bank governor Durmuş Yılmaz, who now works for an opposition party.

The Treasury and Finance Ministry borrowed a nominal 1.4 billion liras from investors to yield 18.34 percent in a competitive auction of the two-year paper later on Tuesday. Bids totaled a nominal 2.74 billion liras.

The government also sold a net 2.37 billion liras in five-year, variable inflation-linked bonds to investors at an average 3.86 percent above the inflation rate, which currently stands at 20.4 percent.

Turkey raised a total of 9.85 billion liras from the two bond sales, including 5.98 billion liras from non-competitive transactions.