ECONOMY

Ozkok remarks hurt Turk bond market

LONDON (Reuters) – Remarks by Turkey’s top general, perceived as raising tension between the government and the military, pushed the country’s bonds lower yesterday in markets that were otherwise little moved. Hilmi Ozkok, Turkey’s chief of general staff, told reporters on Monday he was worried that «compromised individuals» involved in religious activities were being appointed to important positions in the bureaucracy. The military sees itself as being the guardian of the country’s secular constitution. Turkey’s Justice and Development Party (AK), which took power in November last year, grew from the roots of previously banned Islam-based parties. «Turkey is slightly lower from Friday… on local news. But it is not active today (yesterday),» a trader at a German bank said. Turkey’s benchmark 2030 dollar bond was quoted at 104.9 percent of face value, down 0.6 points. «Ozkok affirmed that the military remains suspicious of the AK government and will watch developments closely. The military is irritated by certain personnel changes made by the AK in the civil service and aspects of the European Union reform bill,» said Tim Ash, emerging debt strategist at Bear Stearns in London. However, he said that the market already knows that Turkey’s rulers and generals do not get on, after previous and well-publicized disagreements – including one triggered by Turkey’s generals declining to attend a cocktail party where AK leaders’ wives might wear headscarves. However, other analysts said declines only happened yesterday because Turkey is more likely to suffer price losses when market sentiment as a whole becomes more fragile. «It looks like (part of) a repricing,» said Callum Anderson, emerging market strategist at Bank of America in London. «The whole market has had a blistering rally. That rally has stalled on concerns about global growth.» This month, US Treasury Secretary John Snow said the United States was experiencing a «wobbly» recovery despite having benchmark interest rates at 40-year lows of 1.25 percent. According to Reuters polls growth in Germany might be only 0.2 percent this year, and no more than 0.4 percent in Japan. Emerging bonds have delivered returns of 19.44 percent in the year to date, according the industry benchmark, JPMorgan’s Emerging Market Bond Index plus. However, prices fell about 1 percent last week, as investors took profits.