Turkish Banks Return to International Debt Markets Amid Resilient Investor Appetite

Strategic Insights -

Turkish banks' return to international debt markets following a brief post-March lull underscores a strong investor appetite and continued market access despite domestic and international volatility. This development is attributed to the authorities' commitment to a more orthodox monetary policy and disinflation, which has alleviated investor concerns and contained external pressures. The central bank's decision to lower the policy interest rate to 43% from 46% and subsequent rate cuts are expected to contribute to further declines, with Fitch projecting a policy rate of 35% by end-2025.

Key Takeaways:

  • Turkish banks have resumed issuance in the international debt market, with a total of USD8.8 billion raised since end-1H24.
  • Banks have demonstrated sustained access to the market, with notable deals including Sekerbank's issuance of junior debt.
  • Eurobond and subordinated debt pricing has been stable or slightly higher than in 4Q24, indicating a limited impact from March's volatility and recovered investor sentiment.
  • Syndicated loan rollovers since April have exceeded 100% of maturing volumes, with improved pricing and long tenors, but Fitch views Eurobond and sub-debt pricing as more indicative of investor sentiment.
  • The authorities' commitment to a more orthodox monetary policy and disinflation has allayed investor concerns and contained external pressures.
  • The central bank's rate-cutting cycle is expected to continue, with Fitch projecting a policy rate of 35% by end-2025.

Statistics:

  • USD8.8 billion raised by Turkish banks in international debt market since end-1H24
  • 100% of syndicated loan rollovers since April exceeded maturing volumes
  • 43% policy interest rate from 46% (as of July)
  • 35% projected policy rate by end-2025 ( according to Fitch)
  • 33.5% inflation rate in July
  • 350bp increase in policy rate in the aftermath of March volatility

Sources:

  • Fitch Ratings
  • Turkish banks (unnamed)
  • Central Bank of the Republic of Turkiye (unnamed)