Lira asset confidence up

ISTANBUL – Turkish bonds and the lira firmed yesterday as investors’ cash from a government debt redemption went into lira-denominated bills, brokers said. But uncertainty over the shape the foreign loans the country needs to handle its domestic debt burden will take sparked some choppy trade. Economy Minister Kemal Dervis said he expected to make final arrangements for foreign lending next week and announced he and Treasury chief Faik Oztrak would visit Italy and Canada for talks on financing. Traders wondered what those visits to G7 member countries might mean in terms of the source of the almost $13 billion in financing Turkish officials say they will need in 2002. The fact that Dervis says he will talk with Italy and Canada while [the picture for] foreign aid will become clear next week was a cause of some uncertainty, said one foreign exchange dealer. The Turkish lira weakened to below 1,600,000 after the statement, but closed trade on the independent interbank market at 1,605,000 /1,610,000 to the dollar, still firmer than Tuesday’s close of 1,609,000/1,615,000. There was little trade on the central bank-brokered market, which closed at 1,605,000 lira to the dollar. Bond yields, a crucial indicator of the cost of managing Turkey’s domestic debt load, fell again as optimism about the arrival of foreign cash continued. Average yields on the busiest paper maturing on March 6, 2002, fell around one percentage point to 82.03 percent. The market is optimistic with expectations of foreign resources. And the way the money entering the market from today’s redemption went back into bills boosted the buying, and the volume rose, said one banker. The Turkish treasury repaid 1,287 trillion lira (around $810 million) to the market yesterday, part of a total 21,000 trillion lira in debt servicing between October and end-2001. The IMF said last week it was too early to discuss new loans but broadly backed the country’s budgetary plans for 2002. An IMF delegation is assembling in Ankara this week for more talks with Turkish officials. Confidence in Turkish lira assets has risen in recent days after Dervis said he expected positive movements on the IMF and international lending to plug a 2002 financing gap. A 500-million-euro bond sale on Tuesday, Turkey’s first since January, has added to the optimism. Turkey’s central bank sold $20 million for lira at an average 1,594,368 lira to the dollar in late morning, the currency’s highest level since October 12. A successful treasury auction on Tuesday, when the treasury sold 688 trillion lira in three-month paper at a yield of 78 percent, well below market expectations, has added to positive sentiment led by the loan hopes. Turkish equities closed 0.92 percent lower at 9,578.17 points with brokers saying a recent rise in loan optimism had run its course.

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