International Investors Show Confidence in IMF-Free Turkey with their Wallets

Posted on 13 March 2010

Thursday saw Turkey successfully sell $1 billion of 11-year dollar bonds at the lowest yield on record, the Treasury has said. The yield of the bonds is 2.03 percentage points above US treasures, the lowest ever cost the republic has ever borrowed at through the sale of securities.

The yield on the bonds, as well as the fact that the sale managers (Bank of America-Merrill Lynch, Barclays Capital and Royal Bank of Scotland Group) received orders worth 5 times the issue size, is a massive testament to investor confidence in Turkey. Not least because it comes just days after Turkey ended negotiations with the International Monetary Fund over a standby agreement.

The “lack of an IMF anchor appears not to have had a negative effect,” İnan Demir, an economist at Finansbank in Istanbul, wrote in an e-mailed report.

A further show of confidence came earlier in the week when Investco’s Verusa Venture Capital secured a 200 million dollar investment in 8 Turkish businesses from 3 private equity funds from the US and Europe.

The treasury’s plan is to borrow a further $5.6 billion from international capital markets, taking advantage of reduced borrowing costs as the world clambers into recovery. Turkey sold $2 billion in 30-year bonds on Jan. 5, receiving orders for $7.3 billion.

Turkey does not need IMF funding and has set out a credible economic plan on its own, Deputy Prime Minister Ali Babacan said that day.

Speaking on Friday, Babacan said the cost at which Turkey borrowed on Thursday showed investors rate Turkey’s debt at much higher levels than international ratings agencies. The yield of 2.03 percentage points above U.S. Treasuries demonstrates investors’ confidence in Turkey, he said.

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