Turkey Sells $1.75 Billion in Third Global Bond This Year

(JPMorgan Chase & Co. indexes)

(Bloomberg) -- Turkey has entered the international bond market for the third time this year, capitalizing on increasing investor confidence as inflation starts to slow and the economic outlook improves.

The country sold $1.75 billion in dollar bonds maturing in eight years to yield 7.3%, according to a person familiar with the matter. That’s tighter than initial price talks of around 7.625%, said the person, who asked not to be identified because they’re not authorized to speak about it. 

The transaction was handled by BNP Paribas SA, Citigroup Inc., JPMorgan Chase & Co. and Standard Chartered Plc.

The likely final pricing would be “a reflection of potential strong demand supported by technicals and the fundamental picture,” Morgan Stanley strategist Neville Mandimika said in a note to clients. 

Mandimika said a range of factors was “supportive of the sovereign,” from the government’s decision to skip a mid-year minimum wage hike and a faster-than-expected slowdown in inflation to a potential rating upgrade by Moody’s Investors Service this month.

Turkey has said it plans to borrow $10 billion from international markets through conventional bond and sukuk, or Islamic debt, issuances this year. In March, it raised a €2 billion ($2.2 billion) bond — its first in euros in about three years. That followed a month after a $3 billion 10-year deal with a yield of 7.875%.

The latter notes are now trading above par, with the yield at 7.38%.

Investor confidence in Turkey has grown over the past year following a policy reversal that’s put the country on a more conventional monetary and fiscal track. President Recep Tayyip Erdogan’s government and the central bank are trying to tame inflation that’s above 70%, one of the highest levels in the world.

Interest-rate hikes and spending cutbacks are expected to cool inflation to around 40% by the end of this year.

Finance Minister Mehmet Simsek and central bank Governor Fatih Karahan will attend an investor meeting organized by JPMorgan on Thursday in Istanbul.

--With assistance from Vinícius Andrade, Michael Gambale, Philip Sanders and Ezra Fieser.

(Updates with deal pricing in second paragraph.)

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