Turkey's Treasury sells EUR 1.9bn in 2-year bond, 10-year CPI-linker

By bne IntelliNews April 9, 2013

Turkey’s Treasury sold on Tuesday a two-year fixed coupon bond and a 10-year CPI-linker, borrowing a total of TRY 4.45bn (EUR 1.9bn) ahead of its TRY 8.64bn repayment tomorrow. With today’s auctions the Treasury comfortably met its borrowing target of TRY 14bn for April.

Total demand for the two-year bond was TRY 4.76bn. The Treasury sold TRY 775mn of the bond in the auction at an average yield of 5.97%, above the market consensus of 5.93%. Sales to market makers and public institutions -ahead of the auction- amounted to TRY 961mn and TRY 285mn, respectively. The markets had expected the Treasury to sold TRY 1.92bn of the two-year bond but it raised a total of TRY 1.97bn through this debt auction.

Investors were more interested in the CPI-linker than the two-year bond. The Treasury sold TRY 991.2mn of the bond in the auction. Demand from primary dealers was a strong TRY 7.2bn and the Treasury sold TRY 359.9mn of the CPI-linker to market makers and TRY 1.13bn of the bond to public institutions. As a result, the Treasury sold TRY 2.48bn in the CPI-indexed bond yesterday at an annual compound of 0.96%. Market participants had expected the Treasury to sell the 10-year CPI-indexed bond at 0.98%.

Bond markets will watch the central bank’s next move as the bank’s monetary policy committee will meet next week to review interest rates. Pressure on the central bank to cut its policy rate has grown recently, especially after an disappointing Q4/2012 GDP data. As a sign of mounting pressure, economy minister Zafer Caglayan said earlier this week that the central bank must cut its policy rate to support growth. Most analysts expect a rate cut at the next monetary policy committee meeting.

Separately, the Treasury announced on Tuesday that as part of its 2013 external borrowing programme, it mandated Citigroup, Credit Suisse and JP Morgan for the issuance of a USD-denominated bond due 2043.

Auction Results- April 9
Fixed Coupon bond/due 2015
Amount (TRY mn) Tendered Accepted
Non-Competitive 2,207 1,246
Public 285 285
Primary Dealers 1,922 961
Auction 2,547 724
Total 4,754 1,970
Interest rate (average %) Tendered Accepted
Annual compound 6.04 5.97
CPI-indexed Bond/due 2022
Amount (TRY mn) Tendered Accepted
Non-Competitive 8,323 1,485
Public 1,125 1,125
Primary Dealers 7,198 360
Auction 3,806 991
Total 12,130 2,476
Interest rate (average %) Tendered Accepted
Annual compound 1.09 0.96
Source: Turkish Treasury

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