Bonds, shares, lira all rise

ISTANBUL – Turkish bonds, shares and the lira all rose yesterday as investors bought in the hope that news on the foreign loans Turkey says it needs to plug a 2002 financing gap would come later in the day. Yields on the busiest bonds maturing on April 3, 2002 fell to 77.05 percent from Tuesday’s 78.07 percent while shares traded on the main Istanbul index ended the day up 4.63 percent at 10,636.17 points. Economy Minister Kemal Dervis said he expected news on new foreign lending yesterday, raising hopes foreign creditors would meet most, if not all, of the $13 billion in extra financing Turkey is requesting. We are expecting an important statement from international finance institutes on this issue today, Dervis told a meeting of Parliament’s plan and budget commission. Traders said Dervis’s remarks helped bond yields go lower after a treasury debt redemption to the market yesterday prompted some buying of local paper. The Dervis statement was as important as the redemption in the yield falls, said one local banker. Dervis did not say who would make the loan announcement, but it was widely expected news would come from the International Monetary Fund, overseeing Turkey’s $19-billion crisis pact. Turkish officials have said an IMF team in Ankara for a review of that pact will depart today. One official told Reuters on Tuesday the IMF board of directors may meet unofficially in Washington to grant the extra cash. The IMF has yet to make a statement on the visit. The optimism is continuing on fresh lending. Positive expectations are rising for the announcements that will be made this evening, said Ozgur Gezer of ES Securities in Istanbul. How much? Analysts said that the optimism may be misplaced, however, as while the IMF may provide a portion of the cash Turkey is requesting, further lending may have to filter through from the World Bank and Group of Seven countries. Turkey has been exploring additional sources of cash from G7 countries and other lenders and those might be more easily secured if the IMF backs Turkey’s plans with some new money. Sources in Ankara said Turkey has withdrawn its request to postpone $5 billion in repayments it must make to the IMF next year. The IMF could offer a larger headline sum, knowing Turkey’s indebtedness would be reduced by $5 billion in 2002, analysts said. The lira currency closed at 1,540,000/1,543,000 to the dollar on the interbank market, stronger than Tuesday’s close of 1,550,000/1,554,000. Currency dealers said Dervis’s remarks had reversed earlier dollar buying. Dervis saying an announcement would come this evening and new estimates of the current account pegged the dollar back, said one Istanbul dealer. Dervis told a parliamentary commission considering the 2002 budget that he saw a current account $2 billion in surplus by the end of the year versus a deficit of $10 billion in 2000. He also saw exports exceeding an earlier estimate of $30 billion in 2001. The central bank in the morning sold $20 million in a daily auction of dollars at an average of 1,563,159 lira to the dollar. The lira has lost more than 50 percent of its value against the greenback since a crisis flotation in February, but has regained some earlier losses on expectations of extra IMF cash. There was a belief investors would return to dollars, at least in part. But that view lost its importance after the Dervis statement, one local currency dealer said. The lira closed the day at 1,542,000 to the dollar on the central bank-brokered spot market, a market that has quietened of late as banks steered trade to the independently run interbank market. Turkey yesterday announced a rise in its primary budget surplus to 12,101 trillion lira ($7.8 billion) in the January-October period, well within IMF-backed targets. Turkey had estimated an end-2001 surplus of 11,500 trillion lira.

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