The investor community in London is reportedly talking about a possible new eurobond issue on the way from Turkey.

Timothy Ash, an emerging markets sovereign strategist at Bluebay Asset Management, referred to the speculation on October 1 in an emailed note to investors.

“Rumours in London of a new Eurobond issue—guess the Turks will want to market their new [medium-term program released on September 30] to investors. The challenge there will be explaining its consistency, i.e. How can Turkey get to 5% growth [in 2020], with falling inflation, a real appreciation in the TRY, with the current and fiscal deficits remaining modest?” Ash wrote.

Turkey will on November 7 redeem $1.5bn worth of 10-year paper that pays a 7.5% coupon, according to data from the finance ministry.

Fitch Ratings places Turkey at BB-/Negative, four notches below investment grade. Moody’s Rating Services rates Turkey at B1/Negative, four notches below investment grade, while Standard & Poor’s rates Turkey at B+/Stable, also four notches below investment grade.

At its latest eurobond auction held in July, Turkey’s Ministry of Treasury and Finance sold $2.25bn worth of US dollar-denominated eurobonds due 2024 at a coupon rate of 6.35% and a yield to the investor of 6.45%.

The spread over US Treasury paper rose to 470bp from the 454bp seen in the previous eurobond sale held in March.

Turkish Treasury's 2019 eurobond issues
Issue Date	Currency	Size	Maturity	Coupon (%)	Price	Yield (%)	Spread	Euro Cost (%)
10.07.2019	USD	2.25bn	10.08.2024	6.35	99.563	6.45	UST + 470 bps	3.803
26.03.2019	USD	1bn	26.04.2029	7.625	103.3	7.15	UST + 454 bps	4.859
21.02.2019	USD (Sukuk)	2bn	21.02.2022	5.8	100	5.80	MS + 318 bps
31.01.2019	EUR	1.25bn	31.03.2025	4.625	99.36	4.75	MS + 446 bps
16.01.2019	USD	2bn	26.04.2029	7.625	99.555	7.68	UST + 497bp	4.965
Turkish Treasury's 2018 eurobond Issues
14.11.2018	EUR	1.5bn	16.02.2026	5.2	99.73	5.25	MS + 456.4 bp
23.10.2018	USD	2bn	23.12.2023	7.25	98.917	7.50	UST + 447.5 bp
24.04.2018	USD	2bn	24.10.2028	6.125	99.427	6.20	UST + 336.8 bp
17.01.2018	USD	2bn	17.02.2028	5.125	99.411	5.20	UST + 266.7 bp
Turkish Treasury's 2017 eurobond Issues
13.09.2017	USD	1.75bn	11.05.2047	5.75	101	5.70	UST + 300.5 bp
14.06.2017	EUR	1bn	14.06.2025	3.25	99	3.377	MS + 285 bp
11.05.2017	USD	1.75bn	11.05.2047	5.75	98	5.875	UST + 286.7 bp
06.04.2017	USD (Sukuk)	1.25bn	06.04.2023	5	100	5	MS + 285 bp
23.02.2017	USD	1.25bn	25.03.2027	6	103	5.65	UST + 320.5 bp
23.01.2017	USD	2bn	25.03.2027	6	99	6.15	UST + 375.7 bp
source: treasury

The amount of funds that have been raised on the international capital markets by the Turkish Treasury in 2019 stands at $8.7bn.

Turkey’s overall foreign currency debt sales, including sukuk sold to local and foreign investors, gold-backed securities issued on the domestic market and private placements to shore up state banks, has so far this year jumped to a record high of around $20bn compared to figures below $10bn seen in 2017 and 2018, Bloomberg reported.

The eurobond sale that followed a tiny $150mn issue from state-run Vakifbank suggested that the Erdogan administration had managed to revive its foreign financing channels that were temporarily halted after a series of scandals. The first of those saw Turkish officials shutting down the offshore lira swap market in London prior to the March 31 local elections as they attempted to ensure Turkey’s currency did not slide severely in advance of voting.

Major eurobond issues by Turkish issuers
Issuer	ISIN	Coupon	Volume (USD mn)	End of placement	Maturity date
Treasury	US900123CV04	6.350%	2250	07/10/2019	08/10/2024
Vakifbank			150	06/25/2019	2024
Vakifbank	XS1970705528	8.125%	600	03/21/2019	03/28/2024
Sisecam	XS1961010987	6.95%	700	03/20/2019	03/14/2026
Treasury	US900123CT57	7.625%	1000	03/26/2019	04/26/2029
Yapi Kredi Bank	XS1958649854	8.25%	500	03/07/2019	10/15/2024
Koc Holding	XS1961766596	6.50%	750	03/05/2019	03/11/2025
QNB Finansbank	XS1959391019	6.875%	500	02/28/2019	09/07/2024
Yapi Kredi Bank	XS1957348441	FRN	321.6	02/25/2019	11/25/2027
Turk Telekom	XS1955059420	6.875%	500	02/21/2019	02/28/2025
Treasury (sukuk)	XS1816199373	5.80%	2000	02/21/2019	02/21/2022
Treasury		4.63%	EUR1.25bn	01/31/2019	03/31/2025
Eximbank	XS1917720911	8.25%	500	01/24/2019	01/24/2024
Treasury		7.625%	2000	01/16/2019	04/26/2029
source: cbonds, intellinews

As the “rumours” of an upcoming Turkish eurobond sale circulated, Turkey’s five-year credit default swaps (CDS) fell on September 30 to below the 350-level from the 400s recorded at the beginning of the month.

The price of the USD-denominated 2030 paper, which pays a coupon of 11.875%, was down 0.11% d/d to 137 on October 1 while the 2034 paper, which pays a coupon of 8%, was up 0.23% d/d to 110.

Some 24 of Turkey’s 25 various outstanding USD-denominated sovereign eurobonds (the exception is the November 2019 eurobond maturing next month) and seven of its eight EUR-denominated Eurobonds (the exception is the 2020 paper which was slightly down on an annual basis but stayed positive on a monthly basis), along with each of the four USD-denominated international sukuk bonds have gained value on month-on-month and year-on-year bases, Is Invest’s daily fixed income bulletin showed on October 1.

Turkish corporates’ eurobonds, meanwhile, have also delivered gains in the past month and year.

For the sake of comparison, the Montenegrin finance ministry on September 27 issued €500mn worth of 10-year eurobonds at a cost of 2.55%.

Bond markets are always slow in the summer, but with Russia and Turkey, two of the biggest markets in the Europe/West Asia region, struggling to overcome economic difficulties over the period, there were almost no bond issues at all this year, according to the latest bneIntellinews CEE monthly bond market wrap published on September 5.