Turkey

Investors are keeping a watchful eye over the escalating tit-for-tat threats between the United States and Turkey. Asset prices have so far remain unmoved, but analysts have warned that any move to impose tougher sanctions could be catastrophic.

It has been a busy week so far in CEEMEA bonds this week with three deals sold. Meanwhile, in the loan market, sanctions threaten the pricing on Turkey bank loans.

Turkey’s banks have begun their second refinancing season of the year, though increasing political uncertainty, which has led to new US sanctions on Turkey, could potentially jeopardise primary and secondary pricing levels for the borrowers, according to bankers.

Turkey’s decision to launch a military offensive in Syria has reopened the possibility of sanctions from the US, with its Senate introducing a bill to do so on Wednesday. However, the investor community is doubtful about their impact.

US president Donald Trump’s salvo of tweets against Turkey, which threaten economic sanctions, have had only a muted effect on the Turkish curve, as investors' scepticism towards Trump grows.

Lenders have allowed a cut to Turkish bank margins in their latest refinancing round, according to people familiar with the matter, as the lira recovers from its 2018 crash and the local regulator becomes tougher on bad loans.

The Turkish central bank delivered a 325bp cut to its main policy rate on Thursday. Although the move is larger than the 250bp consensus that had emerged ahead of the meeting, many analysts had been fearful that the move would be even more drastic — and the market appears to be rallying in relief.

Ratings, huh. What are they good for? Absolutely nothing — at least not when push comes to shove in the financing of Turkey's banks. Moody's downgrade to the Turkish sovereign and the country's banks in June sparked concern among syndicated lenders. But as another round of refinancings begins, pricing is tightening and banks are heaping praise upon their Turkish counterparts.

This year’s second Turkish bank refinancing wave has started and borrowers are pushing hard for tighter pricing. Akbank is expected to set the benchmark for its peers by securing tighter margins on its upcoming loan refi.

Albaraka Turk Participation Bank and the Islamic Development Bank have signed a $40m Islamic financing facility to support small and medium enterprises in Turkey.

ING's Turkish arm, ING Bank AS, has raised a $309m-equivalent trade finance loan from international lenders. The deal is a precursor to the year's second round of Turkish bank refinances, expected to begin in the next month.

The rout of the incumbent president Mauricio Macri in the first round of the Argentina elections has investors worried. Argentina’s debt, and that of other 'vulnerable' credits, suffered a huge sell-off early on Monday. But bankers believe that it was not so bad that the primary market will not reopen in September.