Türkiye issues $3 billion 10-year eurobonds, sees strong demand

Capitalizing on investor confidence amidst significant changes in economic strategy

Türkiye has made a notable re-entry into the eurobonds market, marking its first issuance since President Recep Tayyip Erdogan’s electoral victory in May. During that period, Erdogan implemented a more market-friendly economic program. The successful issuance of a $3 billion 10-year bond underscores Türkiye’s efforts to capitalize on investor confidence amidst significant changes in its economic strategy.

Rebounding confidence

Türkiye’s eurobonds issuance, which saw a yield of 7.875 percent, witnessed strong demand from investors. Initial guidance was in the 8.375 percent area. The tightening of the yield by the time final terms were announced indicates robust investor appetite for Turkish bonds. This development reflects positively on Türkiye’s improved credit default swaps, signaling lower borrowing costs for the country. Last year, Türkiye issued $2.5 billion in green bonds due in 2030 at a 9.3 percent yield. Notably, last year’s bond now trades at a yield of around 7.8 percent.

Shift in economic strategy

Türkiye’s decision to tap into the eurobond market comes in the wake of significant shifts in its economic policies. The country has moved away from years of ultra-loose monetary policy. Instead, Türkiye’s central bank opted for a more disciplined approach with substantial interest rate hikes to combat soaring inflation at around 65 percent. These measures have contributed to improved investor confidence and reduced borrowing costs for Türkiye.

Leveraging market sentiment

The timing of Türkiye’s eurobond issuance coincides with growing expectations among investors regarding potential rate cuts by major central banks later this year. This shift in sentiment has fueled the appetite for emerging market securities, a trend that Turkish corporates and the government are keen to capitalize on. The successful issuance of the eurobonds reflects Türkiye’s proactive approach to leveraging favorable market conditions.

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Diversified borrowing strategy

Türkiye’s involvement in international markets extends beyond eurobonds. Earlier this week, the country’s sovereign wealth fund sold a debut $500 million, five-year bond at a yield of 8.4 percent. In November, the country also sold $2.5 billion sukuk with a maturity of five years and a yield of 8.5 percent.

These efforts align with the government’s objective to borrow approximately $10 billion from international markets this year. They also highlight a diverse borrowing strategy aimed at meeting financing needs while capitalizing on favorable market conditions.

Türkiye’s return to the Eurobond market with a successful issuance demonstrates the country’s ability to navigate challenging economic conditions. The issuance, marked by strong demand and a lower yield, reflects positively on Türkiye’s strategic borrowing initiatives.

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