Lower July inflation and laxer IMF loan repayment terms give Turkish bonds a boost

LONDON – Inflation data published on Sunday and moves from the International Monetary Fund to ease Turkey’s payment schedule next year boosted the value of Turkish assets in London yesterday. Turkey’s 2030 dollar bond opened two points higher at 104.875 percent of face value. Meanwhile, Turkey’s segment of the industry benchmark, J.P. Morgan’s Emerging Market Bond Index plus, fell in risk premium by 35 basis points to 615 basis points over benchmark Treasuries. «The IMF extended out the repayments schedule to 2006, and cut the payments due next year from $9.7 billion to $5.2 billion,» said Tim Ash, emerging bond strategist at Bear Stearns in London. On Friday the International Monetary Fund executive board approved a delayed fifth review of Turkey’s $16 billion loan deal and extended repayments of about $11 billion due to the fund in 2004 and 2005. «The big issue for most people in the market was next year’s external financing gap. This has cut a massive hole in that. It is a very strong sign from the Fund,» Ash added. On Friday the IMF board said it was encouraged by recent economic reforms by the Turkish government. This represents a change in tone from previous IMF comments. The review had been held up because of slow progress on economic reform by the Turkish government, fuelling worries in markets about the country’s financial stability. Separately on Sunday, Turkey’s State Statistics Institute said Turkey’s consumer price index (CPI) fell 0.4 percent month-on-month in July, below market expectations, for an annual rate of 27.4 percent. A Reuters poll of 27 analysts predicted a 0.2 percent rise in CPI.