Turkey Dollar Yields Slump to Record Low on Barclays Report

Nov. 8 (Bloomberg) -- Yields on Turkey’s 2030 dollar bonds slumped to the lowest on record after Barclays Plc said a second rating upgrade could trigger at least $2 billion in inflows through entry into benchmark investment-grade indexes.

Yields on 2030 dollar bonds dropped 10 basis points, or 0.1 percentage point, to 4.119 percent, the lowest since the debt was issued in 2000. Two-year benchmark lira yields fell 11 basis points to 6.74 percent, retreating for a fourth day at the close in Istanbul. The lira strengthened 0.2 percent to 1.7833 per dollar.

Moody’s Investors Service could lift Turkey to investment grade in the next five to six months, London-based analysts including Koon Chow and Christian Keller at Barclays wrote in a note today. Fitch Ratings boosted Turkey’s foreign-currency ranking one step higher to BBB- with a stable outlook on Nov. 5, sending two-year yields to a record low and driving the lira to its strongest level since May. A second upgrade would lead to Turkey being included in Barclays’ Global and Euro Aggregate investment-grade bond indexes, the analysts said.

“The inclusion into Barclays’ flagship indices such as the Global and Euro Aggregate could attract about $2-2.5 billion in new demand for the nation’s Eurobonds,” Barclays analysts said in the report.

The extra yield investors demand to hold Turkey’s dollar-denominated sovereign bonds rather than U.S. Treasuries slipped 16 basis points to 192, the biggest slide worldwide, JPMorgan Chase & Co.’s EMBI Global index showed.

Moody’s will hold a conference in Istanbul on Nov. 21. Fitch had a conference in Istanbul today.

Rating

“Turkey’s benchmark rate fell to an all-time low with expectations of a Moody’s upgrade before the Nov. 21 meeting and on the Barclays report stating $2 billion to $2.5 billion of inflows for Eurobonds if a second investment grade follows Fitch,” Isik Okte, a strategist at Halk Securities in Istanbul, said in e-mailed comments.

Moody’s raised Turkey to Ba1 on June 20, one level below investment grade and three steps below Russia, citing a “significant” improvement in public finances and policies. Greater resilience to external shocks is a prerequisite for raising it to investment grade, the ratings company said in an e-mailed statement on Oct. 30.

“We are seeing good sums of real money entering Turkey,” Sercan Kiliclar, a fixed-income trader at Akbank TAS in Istanbul, said in e-mailed comments. “The Barclays note affected the Eurobond market and the credit-default swap market.”

Credit-default swaps on Turkey fell three basis points to 150 today, falling below Russia for the first time October last year.

To contact the reporter on this story: Selcuk Gokoluk in Istanbul at sgokoluk@bloomberg.net

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