Turkey $9 Billion Bond Rout Signaled by Swaps After Botched Coup
- Turkey CDS spike past junk-rated Russia, Brazil since crisis
- S&P Global Ratings cut Turkey to BB from BB+ on Wednesday
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The thwarted coup attempt in Turkey is leaving derivatives traders with little doubt the country’s three-year sojourn in investment grade is coming to an end, potentially triggering a fire sale of almost $9 billion of bonds.
In the three trading days since President Recep Tayyip Erdogan survived a bid by a faction of the military to depose him, the country’s five-year credit-default swaps have soared above junk-rated Russia and Brazil while the lira tumbled more than any other currency in the world to record lows. The credit score implied by the swaps contracts is four steps below investment grade, according to Moody’s Analytics, one level lower than before the crisis erupted on July 15.