Turkey makes early announcement for $35 bln July-August redemption
Posted by meb at June 28th, 2008
The Treasury plans to sell 12.1 billion YTL of debts in July and 10.6 billion YTL debts in August, it said in a written statement late on Thursday announced earlier than usual. The Turkish Treasury announces its debt programs on the last work day of the month.
The total redemption in July and August is equal to the 33 percent of Turkey’s projected debt service for 2008.
The Treasury also said the domestic debt service to the market, excluding public banks and payments to the central bank, amounts to 19.8 billion YTL.
Prior to this the Treasury projects to borrow 12.2 billion YTL from the market, targeting a market-to-market roll-over ratio of 62 percent, whereas the overall monthly roll-over ratio is planned to be around 6 percent, remaining lower than the annual roll-over target of 70 percent.
Some economists also expect the Treasury could use the cash reserves it keeps at the central bank to redeem debt. According to the latest data, the Treasury has around $19 billion at the central bank.
“The Treasury is considering using some of the 20 billion liras ($16.5 billion) of reserves it has on deposit at the central bank to pay the debt,” Bloomberg reported an uncited government official as saying.
Ozgur Altug, chief economist of Raymond James, said the Treasury could use its cash reserve at the central bank.
“The Treasury’s calculations indicate that the Treasury will use around 6 billion YTL ($4.9 billion) worth of its cash reserves in July, which accounts for 30 percent of the total cash reserves of the Treasury,” Altug said in a research note to clients on Thursday.
BOND YIELDS
The hefty redemptions is also expected to put an upward pressure on the bond yields.
Bond yields have eased from 20-month highs of around 22.5 percent seen earlier this month but are expected to rise again to 23 percent or higher as July and August redemptions approach.
Yields on lira-denominated government debt rose an average 24 basis points to 22.16 percent on Thursday, highest since the sharps sell-offs in 2006, according to an ABN Amro Holding NV index.
Yields are expected to rise due to the government’s plan to liquidate the Housing Support Fund, which will make the Treasury payout 2.9 billion YTL ($2.39 billion) to entitled parties, which could exert further pressure on yields.
The announcement of July as a month for fiscal recess, will also postpone some tax payments (estimated at 4.8 billion YTL ($3.96 billion)) and this is also seen as another reason for July to be negative, as well as relaxing the treasury’s hand in August, Raymond James said.
Yields are also in close correlation with the Turkey-IMF relation since an IMF agreement is seen as an important anchor for Turkey’s economy. Investors watch for any news about the government’s plans with regard to the IMF following the expiry of its $10 billion loan programme in May.
Ankara is yet to announce a decision, but Economy Minister Mehmet Simsek said this week that they were working on a precautionary stand-by deal, which the market would welcome as an anchor amid so much uncertainty.
source: Hurriyet daily
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