(Bloomberg) -- Turkey has mandated banks for the issuance of a 10-year dollar-denominated bond, which will be swapped for existing shorter-term notes to ease immediate repayment pressures.
Turkey hired Bank of America Corp., Banco Bilbao Vizcaya Argentaria SA, Citigroup Inc. and JPMorgan Chase & Co. to help issue the new bonds as part of its external borrowing program, the Treasury and Finance Ministry said in a statement on Tuesday.
The country’s outstanding dollar-denominated bonds maturing between 2024 and 2026 will be replaced with the new bonds or bought back in cash, according to the statement.
Bloomberg reported in March that the Turkish Treasury was considering a buyback of short-term dollar bonds and substituting them with longer maturities.
Turkey Said to Have Discussed Buyback of Near-Term USD Bonds
The liability management transaction will take place on Sept. 25, the Treasury said. Initial results will be announced on Sept. 26 and the process will be completed by Oct. 1, with final results scheduled for release on Oct. 3.
“In a world where all leading central banks are in the process of cutting interest rates, it makes sense to switch to these new bonds with a spread around UST+300” said Tufan Comert, an emerging-market strategist at BBVA in London.
Eurobond yields are expected to fall in the short term, while yields around the 10-year maturity will increase slightly due to the new supply, Comert said.
“Following this, we expect the Turkey yield curve as a whole to shift downwards with the influence of global factors, assuming that economic policies in Turkey follow the current order. In addition, the decrease in short-term external liabilities is positive for the credit rating.”
Following elections in May 2023, Turkey has seen upgrades from major credit rating firms amid a return to orthodox monetary policy that helped increase the central bank’s reserves and rein in burgeoning inflation. The next rating assessment, from S&P, will be on Nov. 1.
Turkey has borrowed around $7 billion in the international bond markets this year, against a target of $10 billion. The country will have to service around $32 billion in public sector debt held by foreign investors in 2025, according to official data.
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