Turkish bonds replace Argentina's as world's worst performers

Turkey has replaced crisis-ridden Argentina as the world’s worst local currency bond performer this year after the lira plunged to a record low, Bloomberg reported.

Investors who bought lira-denominated bonds have lost 38 percent in dollar terms this year after the debt plunged 8 percent in just a week, Bloomberg’s Selçuk Gökölük said. Meanwhile losses for Argentina’s bonds have stabilized at 36 percent, he said. The average decline for local currency emerging market bonds this year is 4.7 percent.

Turkey’s lira has slumped almost 30 percent this year amid multiple diplomatic crises with the United States that have led to sanctions and as government stimulus raised concern that the economy was overheating. The central bank’s independence to raise interest rates to combat the lira’s slide has also been compromised by politicians.

Yields on Turkey’s 10-year lira bonds surged above 20 percent on Tuesday, a record high. Two-year debt is fetching returns of more than 22 percent. Meanwhile, Turkey’s stock index is the worst performer in major markets globally this year.

The lira slid as much as 6.3 percent to a record low of 5.42 per dollar on Monday. It recovered slightly on Tuesday, trading up 0.8 percent at 5.29 against the U.S. currency.

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