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Cablegate: Turkey's Economy March 11: Markets Quiet, Weak

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS ANKARA 001529

SIPDIS


SENSITIVE


STATE FOR E, P, EUR/SE AND EB
TREASURY FOR U/S TAYLOR AND OASIA - MILLS
NSC FOR QUANRUD AND BRYZA


E.O. 12958: N/A
TAGS: ECON PREL TU
SUBJECT: TURKEY'S ECONOMY MARCH 11: MARKETS QUIET, WEAK
DEMAND FOR DOLLAR BOND

Sensitive but unclassified, and not for internet
distribution.


Unsuccessful Dollar Bond Auction
--------------------------------


1. (U) On March 11, Turkish Treasury auctioned a 546-day
dollar-denominated bond in the local debt market to weak
demand. The annual yield - 6.88 percent - was below market
expectations, but the Treasury only succeeded in selling
$180.5 million.


2. (SBU) Comment: The debt redemption on March 12 is quite
small - TL 545 trillion (about $337 million). The largest
redemption of the month is next week, with a payment of TL
5.2 quadrillion ($3.2 billion). Thus, today's auction
doesn't help raise money for next week, and this will put
added pressure on the March 18 auction.


3. (SBU) Comment continued: Local bond traders (Deutsche
Bank's Dilek Yardim) tell us the Turkish sovereign dollar
bonds are currently less attractive than lira-denominated
debt, with its 25 percent real interest rate. This wasn't
always the case. In 2001, when exchange rate risk was high
in Turkey, dollar bonds were quite attractive (and the yields
were 12-14 percent as compared with today's 7 percent.)


Markets Quiet, Waiting for the Erdogan GOT
------------------------------------------


4. (SBU) Local financial markets remained in a waiting mode,
with T-bill yields unchanged at 56.5-57 percent compounded,
lira at TL 1,610,000 to the dollar and the stock exchange
down 0.8 percent in very light trading.


5. (SBU) Comment: Markets are waiting for the formation of
the Erdogan government, with expectations still high that the
new GOT will move to pass a second resolution that unlocks
the U.S. package. We are hearing rumors from multiple
sources that Erdogan might change several ministers,
including MinState for Treasury Ali Babacan. We have no
confirmation of these rumors.
PEARSON

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