Turkey’s central bank asked some local lenders this week to step in and buy the country’s dollar bonds, which have fallen since the first round of the presidential elections, according to people familiar with the matter.
(Bloomberg) — Turkey’s central bank asked some local lenders this week to step in and buy the country’s dollar bonds, which have fallen since the first round of the presidential elections, according to people familiar with the matter.
Some of the country’s banks were called by officials on Monday and asked to buy dollar bonds across multiple maturities in secondary markets, the people said, asking not to be named as they aren’t authorized to speak publicly on the matter.
The move, the people said, was aimed at keeping borrowing costs stable and also to prevent a spike in credit-default swaps — a measure of protection against potential credit events, such as default. The lenders were not given purchase targets.
The central bank declined to comment.
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Turkey’s five-year credit default swaps closed 19 basis points lower at 668 basis points on Wednesday, the biggest drop since May 18, after surging above 700 basis points on Monday. The yield on Turkey’s 10-year generic dollar bond dropped more than 35 basis points to 10% over the past two days after hitting the highest level since October on Monday.
In the currency markets, the lira has continued to weaken. It closed 0.3% lower on Wednesday at 19.8968 per dollar, bringing its decline this year to 6%.
Read more: Bets Against Turkish Lira Hit Record With Controls Under Strain
Turkish assets have come under renewed pressure since the May 14 vote, as bets on a defeat of President Recep Tayyip Erdogan unraveled and investors weighed the possibility of his unconventional economic policies continuing. Erdogan will face opposition candidate Kemal Kilicdaroglu in a runoff vote on Sunday.
–With assistance from Srinivasan Sivabalan.
(Updates prices.)
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