Turkey hires banks for sale of 30-year dollar bonds

Turkey is borrowing at lower costs than many European countries because its debt load is decreasing and its banks are healthy, Deputy Prime Minister Ali Babacan says. AA photo

Turkey offered dollar-denominated bonds maturing in 2041, taking advantage of a drop in borrowing costs to finance budget spending.
The Treasury in Ankara hired JPMorgan Chase & Co., Deutsche Bank AG and Barclays Capital to sell the bonds, according to a statement on its website today which didn’t specify how much debt is on offer. They may be priced to yield about 6.15 percent, according to three people with knowledge of the matter.
A November sale of euro-denominated bonds saw yields drop to a record low.
Turkey is borrowing at lower costs than many European countries because its debt load is decreasing and its banks are healthy, Deputy Prime Minister Ali Babacan said at a conference in Ankara on Wednesday. The country’s economy probably grew more than 8 percent last year, according to International Monetary Fund forecasts, and the budget deficit is narrowing.
The government has planned for about 12.5 billion Turkish Liras ($8.1 billion) in foreign borrowing this year, including payments from international lenders such as the World Bank.
The Treasury began to raise money to finance this year’s budget when it sold 500 million euros ($662 million) of 10-year euro-denominated bonds on Nov. 12. The yield of 4.25 percent was the lowest ever for a sale in that currency.
Turkey sold $2 billion of 30-year dollar bonds a year ago at 6.85 percent, and those securities are currently trading to yield about 6 percent. Borrowing costs on local markets have also plunged, with yields on benchmark two-year lira debt falling to a record low of 6.79 percent earlier on Wednesday.

Debt burden falls

Turkey cut its budget deficit to 4 percent of gross domestic product last year from 5.5 percent in 2009, according to government projections, and is targeting a gap of 2.8 percent this year. The ratio of debt to GDP is forecast to fall to 40.6 percent this year from 42.3 percent in 2010.
Fitch Ratings on Nov. 24 revised the outlook on Turkey’s BB+ local and foreign-currency bond rating to positive from stable, citing a strong economic recovery and improving public finances. The Fitch rating is one step below investment grade. Moody’s Investors Service also raised the outlook on Turkey’s Ba2 rating, two levels below investment, to positive from stable on Oct. 5