Borsa Istanbul Sees Jump in Foreign Bond Holdings With Euroclear

A possible Turkish membership to the world’s biggest bond settlement system could increase foreign ownership of Turkey’s sovereign debt by as much as 50 percent, the chairman of the Borsa Istanbul said today.

“We will be reaching as many as 200,000 new investors with Euroclear,” Ibrahim Turhan said at a news conference at the bourse, responding to a question on possible membership to Brussels-based Euroclear Bank SA.

Takasbank, the settlement and custody unit of Borsa Istanbul, estimated an increase of foreign ownership to 30 percent from the current 24 percent, in an e-mailed response to questions from Bloomberg on March 25. Such an increase could drive down the yield on Turkish two-year bonds by as much as 200 basis points, Takasbank estimated.

Yields on two-year benchmark bonds fell 18 basis points to 5.77 percent at 1:54 p.m. today, bringing this month’s decline to 58 basis points, the biggest monthly fall since November. Ten-year yields dropped seven basis points to 6.79 percent, their lowest level since March 5 on a closing basis.

In an interview with Bloomberg in Dubai on March 20, Turhan said Turkey was hoping for an outcome in talks with Euroclear by the end of the year. “Their members are in Turkey as I speak, work continues,” he said today.

Net foreign inflows into Turkish government debt rose a record $16 billion last year, driving yields 483 basis points lower, the biggest decrease among 20 major emerging markets tracked by Bloomberg.

Euroclear began direct clearing of Russian debt in February for the first time, in a move that Goldman Sachs Group Inc. estimated may bring as much as $30 billion of inflows to the country. Turkey’s government debt market, at $295 billion, is almost twice Russia’s at $151 billion, according to data compiled by Bloomberg.

Borsa Istanbul, which combines the 28-year-old Istanbul Stock Exchange with the Istanbul Gold Exchange and the Izmir-based derivatives exchange, opened with a ceremony attended by Prime Minister Recep Tayyip Erdogan on April 5.

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