Turkey in Talks With Euroclear to Open Lira Bond Market

Turkey is in talks with Euroclear Bank SA to open trading in Turkish debt to international investors, Istanbul Stock Exchange Chairman Ibrahim Turhan said.

“We’ve had some contact with senior managers of Euroclear” and “we will have another meeting very soon in Istanbul,” Turhan said in an interview at an investment conference in Dubai. “The work is still in progress and very soon we will have a tangible outcome.”

Euroclear, which operates the world’s biggest bond settlement system, began direct clearing of Russian debt last month, allowing foreign access without the need for a local brokerage account for the first time in a move Goldman Sachs Group Inc. estimated may bring as much as $30 billion of inflows. Turkey’s government debt at $289 billion is almost twice Russia’s $152 billion, data compiled by Bloomberg show.

Turkish benchmark two-year bonds were the best performers in major emerging markets last year, with yields dropping 483 basis points, or 4.83 percentage points, as Turkey got its first investment-grade ranking in 18 years in November from Fitch Ratings. Yields rose one basis points to 6.18 percent at 5:00 p.m. in Istanbul today, leaving them unchanged for 2013. The lira climbed 0.4 percent to 1.8180 per dollar.

Asian Accounts

“This will surely help to broaden the investor base further,” Yarkin Cebeci, an economist at JPMorgan Chase & Co. in Istanbul, said by e-mail today. “Some of the investors, especially Asian accounts, have been reluctant to have exposure in Turkey as Turkish bonds were not Euroclearable.”

Turhan said he hopes talks with Euroclear will be finalized “before the end of the year.”

“We are speaking with Turkish officials, but it is too early to provide information on the scope or timeline of any link with Turkey’s local infrastructure,” Stephan Pouyat, Euroclear’s head of global reach product management in Brussels, said in an e-mailed response to Bloomberg.

Euroclear’s impact is unlikely to be as significant as for Russia because Turkish debt has higher levels of foreign ownership, according to Esther Law, a London-based emerging-market strategist at Societe Generale SA.

Foreign ownership of Russia’s OFZs will rise to 10 percent from 6.5 percent in the medium term and to 25 percent in the long term, the Russian Finance Ministry said on its website Dec. 28. In Turkey, non-residents already hold about 22 percent of the total debt, based on the $64.8 billion the central bank said was held by foreign investors on March 8.

“Turkish government securities are traded very well at an international level,” Turhan said. “It’s one of the deepest markets in the world in terms of fixed-income securities and the advantage in Turkey is that government securities are traded at the exchange.”

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