Turkey’s markets recover after debt auction cheers up investors

ISTANBUL (Reuters) – Turkish financial markets recovered from earlier falls to end higher yesterday after a debt auction heartened investors worried by the country’s debt load and its bid to secure additional IMF funding. The sale helped shares close 1.85 percent higher at 7,637.58 points after spending most of the day flat, while the yields on benchmark bonds maturing on March 6, 2002 weakened to 94.99 percent from Monday’s 94.73 percent, then firmed to 94.25 percent in deals value-dated for today. The lira closed at 1,627,000 to the dollar on the central bank-brokered spot market, up from Monday’s 1,633,000 and levels around 1,635,000 hit earlier in the day. Average deals at a morning central bank daily auction of $20 million for lira came in at 1,635,250 lira. The basic reason for the rise is the fact that the (debt) auction result was not negative, said Utku Yarpuzlu of Vakif Investment. Interest rates in debt auctions are a sign of how easily Turkey will be able to roll over a hefty domestic debt load. The treasury sold 445.3 trillion Turkish lira in 91-day bills yesterday at a maximum yield of 92.49 percent as it struggled to service a debt load swollen by the bailout of a crisis-hit banking sector. The sale was roughly in line with market expectations. A Reuters poll of 11 bankers saw demand at the auction of 500 trillion lira and yields of 91-93 percent. But the country still needs external support next year if it is to manage the debt burden. An economy official told Reuters that Turkey had requested $9 billion in additional funds for 2002 to plug a financing gap as it seeks to implement an IMF-backed pact that foresees $15.7 billion in crisis loans this year. An IMF delegation is due in Turkey this week for talks about 2002 and investors are watching closely. Brokers said any upside on the stock exchange would be limited as the index tracked foreign markets and nerves tensed over a possible widening of the US attack to targets in Iraq. War is pregnant with possibilities. The state of the US economy is already clear. When you think of all the international dimensions you can think that we will be hit negatively, said Murat Comert of Deger Securities. The treasury is set to pay a debt redemption of 1,671 trillion lira (around $1 billion) today, money some traders said could move into safe-haven dollars, bringing further lira depreci-ation.

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