Turkey

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.

Emerging market loan bankers have been trying to understand the impact on syndicated lending of the US’s latest sanctions on Russia. The proscriptions have instilled more uncertainty into a collapsing market.

The US Federal Reserve delivered a 25bp rate cut as expected on Wednesday, but the signalling failed to satisfy investors desperate for more accommodative policy, causing a mild sell-off in emerging markets.

Investors’ fears were realised on Thursday when the Turkish central bank lowered its key policy rate by 425bp. Analysts joined them in saying that the move will provoke a return of inflation, damage the lira and complicate loan pricing.

Investors’ fears were confirmed on Thursday when the Turkish central bank lowered its key policy rate by 425bp. Analysts joined them in saying that the move will provoke a return of inflation and damage the lira.

Turkey’s bonds have put up an incredible display of resilience to geopolitical shocks so far, but investors fear that an aggressive cut to the main policy rate will cause inflation to return and puncture confidence in the country’s economy.

As Turkish bank borrowers prepare to refinance existing debt, a plethora of domestic and geopolitical troubles has once again brought pricing into question. Though secondary market spreads remain tight, bankers say primary issuance could widen.