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  • Turkey Bond Market Update - April 2013 0 comments
    May 27, 2013 2:07 AM

    The revision of Turkey's long term ratings by S&P during the last week of March set the stage for increased activity in the bond market during April 2013. While bonds rallied further as central bank cut each of its key rates by 50 bps, the market also saw some issuances. During the month there were three debut issuances indicating that the bond market is maturing and supply from IG rated issuers will continue to trickle. This was also the reason why the new issuances were placed at lower yields even for the first time issuers. The markets have also considered Turkey's peace efforts towards ending the three-decade war with Kurdish militants.

    During the month of April 2013, Turkish bond market saw issuance of USD 4.6 billion Eurobonds (Sukuk), compared to USD one billion during the same month last year. There were totally six Eurobond issuances including one sukuk and a sovereign bond. Apart from a bond issued by a diversified investment company - Koc Holdings, all the other four non-sovereign bonds were issued by banks for a term of five years. Banks have been the second largest issuers of bonds in Turkey next only to the government.

    Isbank, the largest commercial bank in Turkey issued USD 750 millions notes in first week of April. The bonds were priced at 3.75 percent for a term of five years. Following Isbank, was the government owned bank Vakiflar which issued USD 500 million at same price and maturity. However, the debut issuance of Aklease, leasing unit of Akbank was priced higher at 4.25 percent despite being rated BBB. The five year USD 250 million bonds carry a coupon of 4.125 percent and were priced at 99.4 with an initial yield of 4.25 percent. However, Turkiye Finances, which in majority held by National Commercial Bank of Saudi Arabia, placed five year bonds at a lower yield, compared to Aklease. It was able to raise USD 500 million at 3.95 percent yield. Another debut issuer, Koc Holding, which had been planning a bond issue since a year, came out with a seven year issuance at 3.5 percent coupon. The bonds were priced at 99.6 with an initial yield of 3.6 percent.

    Republic of Turkey sold 30 year bonds worth USD 1.5 bn at yield as low as 4.95 percent, a spread of 201 bps over US treasuries. The bonds were priced at the lowest of all the 30-year bond issuances made by the country. The bonds were issued at a discount at 98.834 and carry coupon of 4.875 percent.

    The global fixed income investors continue to take interest in Turkish bonds despite the record low yields. As majority of the bonds are trading at premium, the investors find it hard to stay invested in longer term bonds with very low return. When investing in long term bonds, investors are advised to consult a financial advisor who is best equipped to assess the risk, return and duration of investments.

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