Turkey Offers $1 Billion 2041 Bonds After Yields at Low

Turkey is offering $1 billion of dollar bonds maturing in 2041 in the first such sale since February after yields dropped to a record low.

The bonds were priced to yield 5.75 percent, according to two people with direct knowledge. Yields on the bonds have tumbled as much as 108 basis points since January, before climbing four basis points today to 5.73 percent as of 7:10 p.m. in Istanbul. They fell to 5.69 percent yesterday, the lowest since an initial sale in January last year.

Investors have been returning to Turkey after the economy grew 8.5 percent last year, reducing the country’s debt to gross domestic product ratio to about 42 percent, the lowest in Europe after the Czech Republic, Russia and Sweden. Banks including Morgan Stanley and JPMorgan Chase & Co. say Turkey’s current account deficit, which reached a record in October, has peaked, boosting confidence in the economy.

“I guess Turkey feels that demand is good, the cost is acceptable and low, historically,” said Aziz Unan, who manages $50 million of Turkish, Middle Eastern and east European assets at Rennaisance Asset Managers in London.

The Treasury in Ankara hired Deutsche Bank AG, Morgan Stanley (MS) and Goldman Sachs Group Inc. (GS) for the sale, it said in a statement on its website today.

Bond Sales

Turkey has sold $3.6 billion of bonds so far this year against a target of 9.5 billion liras ($5.3 billion) for foreign borrowing, which includes World Bank and other international loans, according to data compiled by Bloomberg.

Ten year bonds in liras dropped 13 basis points to 8.86 percent today, the lowest level since September.

The Treasury last sold 10-year dollar bonds in February, issuing $1 billion to yield 5.75 percent. The country also sold $1.5 billion of 10-year bonds on Jan. 18 at a 6.35 percent yield and 90 billion yen ($1.1 billion) of 10-year Samurai bonds in March.

Turkey initially sold $1 billion of the January 2041 bonds at a 6 percent coupon in January 2011. The yield was 6.25 percent, data compiled by Bloomberg showed.

Moody’s Investors Service rates the country’s debt Ba2, two steps below investment grade, with a positive outlook. Fitch Ratings ranks Turkey at BB+, one step below investment grade with a stable outlook. Standard & Poor’s cut the outlook on Turkey’s debt to stable from positive on May 1, maintaining the BB rating, two steps below investment grade.

To contact the reporters on this story: Ali Berat Meric in Ankara at americ@bloomberg.net; Benjamin Harvey in Istanbul at bharvey11@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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