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Emerging Europe: Don’t bank on Turkey for a bond market revival

Turkish borrowers have become increasingly active in the Eurobond markets in recent years. But with funding costs rising, investment falling and political risk ever-present, could the last large source of new bonds in emerging Europe be about to dry up?

When Turk Eximbank sold a $500 million bond on February 1, debt capital markets bankers breathed a sigh of relief. After more than two months with no deals from Turkey, some had started to wonder if one of emerging Europe’s most reliable sources of new bonds was in danger of drying up completely. 

Adil Kurt-Elli-160x186

Adil Kurt-Elli, HSBC

“To get a borrower to come back into the market and offer an answer to the question a lot of people have been asking was a very positive outcome,” says Adil Kurt-Elli, head of central and eastern Europe and sub-Saharan Africa debt capital markets at HSBC.  Hopes that the state-owned bank’s success might herald a renewed wave of issuance from Turkey, however, may be disappointed. The problem, say bankers, is not a lack of appetite for Turkish risk. As Turk Eximbank proved, bond investors are largely unfazed by Turkey’s uncertain macroeconomic outlook, internal political complications and exposure to regional conflicts.

“Geopolitics play a big part in investors’ decision-making whenever specific tensions rise, but in the normal course of business investors have been able to shrug it off on the basis that it’s been a theme of investing in the region for decades and it’s usually priced in already,” says Tommaso Ponsele, a CEEMEA DCM banker at Citi.

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