Turkey

Turkey announced a five year dollar Global benchmark on Tuesday, returning to the market for the first time since March and making the most of the rally in Turkish assets.

Investors gained confidence from the defeat of Turkey's ruling AK Party in the rerun of the Istanbul municipal elections on Sunday. Asset prices have rallied, improving conditions for Turkish borrowers.

Banks pride themselves on analysing and pricing credit. But are they really just slaves to the rating agencies?

Turkey’s banks, renowned for their resilience as borrowers to market shocks, risk paying wider margins when they refinance debt later this year, according to some bankers. The dismal outlook follows Moody’s recent downgrade of Turkey’s sovereign debt and 18 of its banks.

Moody’s took the axe to Turkey’s credit rating after market close on Friday, cutting the sovereign’s rating from Ba3 to B1 in a move that has raised hackles from some international investors.

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Turkish banks have completed the first refi season of the year and, despite ongoing geopolitical issues including concerns about Turkey's purchase of S400 missiles from Russia, spreads in the secondary loan market have stabilised at slightly wider levels.

Türkiye İş Bankası has closed its first semi-annual refi for this year, as the refinancing season for Turkish banks comes to an end.

Loan bankers are coming to the painful realisation that emerging markets borrowers will be increasingly drawn to the bond market this year. Conditions there are becoming ever more attractive, perpetuating a decline in global loan volumes. But those companies abandoning loans for bonds should bear in mind the advantages of the loans market, not least its resilience.

Garanti Bank has closed its loan refinancing at $783m-equivalent after receiving an orderbook of over $1bn. The borrower has welcomed 14 new lenders, as banks demonstrate their commitment to troubled Turkey.

Investors appear to be split over whether or not Turkey will follow through with its proposed purchase of a Russian S-400 missile system, in the face of likely sanctions from the US if it does.

Investors are clear that president Recep Tayyip Erdoğan is once again to blame for another tumultuous week in Turkish assets. The country’s fate in the capital markets is in his hands. Investors have been quick to forgive in the past but their patience is not infinite.