Turkey

Turkish assets have performed this week after a long period of weakness with two emerging markets portfolio managers saying that the worst of the volatility in the lira exchange rate may have passed.

Turkey’s Central Bank is fighting a losing battle, after its latest bid to protect its currency failed to prompt the support from investors that it hoped for. The move brought the CBRT closer into line with international standards, but could soon be irrelevant after elections on June 24.

Turkish dollar bonds outperformed in a heavy market on Tuesday after the Central Bank of the Republic of Turkey (TCMB) moved to simplify rates in order to protect the lira.

Yapi Kredi is the latest Turkish bank to refinance its syndicated loan, with the bank breaking from its peers and raising euros alongside the commonly seen dollars in the two year tranches.

Turkey’s central bank stepped in on Wednesday to stem the collapse of its currency, delivering an emergency 300bp increase, but market commentators deemed the move too little, too late, saying investors' confidence in the bank remained impaired.

Conviction levels are low among emerging market investors with many waiting on the sidelines this week as geopolitical risk and local currency weakness persist in wreaking havoc on EM bonds.

Telecom Egypt has agreed credit lines totalling up to $900m, as Egyptian borrowers find a warm reception from lenders.

Sometimes, investors get hit by political events that come out of nowhere. Other times, they walk straight into an oncoming freight train, even though it's blowing its horn at top volume.

Turkish president Recep Tayyip Erdoğan sent the country’s sovereign bond yields flying this week as he vowed to take more responsibility for monetary policy if he wins next month’s elections. His comments prompted another sharp dive in the value of the Turkish lira — felt strongly by the country’s dollar debt issuers — as investors feared that even if the central bank does hike rates to defend the currency, the measure could be soon reversed. Francesca Young and Mike Turner report.

Turkey’s Isbank has signed a $1.48bn-equivalent syndicated loan in line with the existing pricing benchmark for its compatriot peers, again showing that rating downgrades have little effect on loan borrowing rates for the country’s banking sector.

Equity and bond investors hoping for the Turkish central bank to step in and cool its overheating economy will be dismayed by President Erdogan’s pledge to influence its decisions. But they should not be surprised.

Loans bankers are keeping their cool over Turkey’s sharply deteriorating lending conditions, though borrowers in the country with a majority lira revenue and hard currency exposure have been warned that tough times are head.