Turkey

Turkey’s Sekerbank is set to launch the first Turkish covered bond. Although it is backed by Turkish lira SME loans, the deal is nevertheless a genuine dual recourse instrument that is enshrined within the Turkish law. It is not only the first deal to be issued under the Capital Markets Board of Turkey law, but also the first secured deal to be backed by cashflows from existing local currency assets, rather than future receivables.

New euro benchmark covered bond supply appears on course to hit the market tomorrow (Tuesday) as issuers continue with preparations for deals despite a backdrop of uncertainty about whether or not a bail-out of Ireland will be set in motion.

With industry veterans saying that low ratings should be no obstacle to covered bond status and the rating agencies holding out the promise of piercing the sovereign ceiling, Turkish issuers were last Friday being bullish about their chances at the 11th Central European Covered Bond Conference, organised by the Banks Association of Turkey and the Association of German Pfandbrief Banks in Istanbul.

“Between two evils, I always pick the one I never tried before.” Mae West’s quote was invoked by Fritz Engelhard, director of European fixed income strategy at Barclays Capital, at the 11th Central European Covered Bond Conference in Istanbul yesterday (Thursday) to highlight the dilemma some issuers felt they were confronted by when choosing between structured and legislative covered bonds.

Delegates at the 11th Central European Covered Bond Conference, organised by the Banks Association of Turkey and the Association of German Pfandbrief Banks in Istanbul, yesterday (Thursday) debated the true cost of public supervision of covered bond issuance and, crucially, where deals from emerging markets should trade versus government bonds.

Turkey’s Capital Markets Board published the Bylaw on Principles Regarding İTMK (Turkish covered bonds) on 5 October, marking another regulatory step on the journey towards the first covered bond from the country.