Turkish bond auctions enough for huge debt redemption

ISTANBUL (Reuters) – Turkey’s heavily indebted Treasury easily covered a large debt redemption to the market due later this week via two auctions of domestic debt yesterday amid optimism over an IMF program and progress on privatization. The Treasury sold a net 6,083.2 trillion lira ($4.3 billion) in 413-day and 140-day lira debt against a redemption of 5,681 trillion lira to the market today, the largest in July. Turkey’s privatization board said on Monday it approved the $605 million sale of a majority stake in chemicals firm Petkim to local Standart Kimya, an Uzan family company, the first big sale of 2003 as Ankara chases $2.1 billion in sell-off revenues for the year. Ankara is working to pay down a domestic debt load of some $122 billion, swollen by a bailout of crisis-hit banks, and lower the high real interest rates it pays. «Very good auction… News of the new IMF visit and Petkim sale seems to have sustained local market sentiment,» said Bear Stearns in a research note, also pointing to optimism over June inflation data due for release tomorrow. Local investors have taken positively news of the visit by an IMF team to Turkey on July 9 amid delays to laws under Turkey’s $16 billion pact with the fund. Ankara has pledged to pass key reforms ahead of an IMF board meeting, planned for late July. Nominal bids for the 413-day bonds totaled 7,587.8 trillion lira and 2,241.6 trillion lira for the 140-day paper. The Treasury has now covered more than half of the 10,882 trillion lira in domestic debt it is due to pay the market in the whole of July. The Treasury will face a 2,013-trillion-lira redemption to the market on July 9, the most it will need to pay in a single day during the remainder of the month. The Treasury sold the 413-day debt at a maximum yield of 50.96 percent and the 140-day debt at a maximum yield of 44.5 percent. Yields were roughly in line with market expectations.

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