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Cablegate: Turkey's Economy April 8: Successful T-Bill

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

081056Z Apr 03

UNCLAS SECTION 01 OF 02 ANKARA 002258

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 APRIL 8: SUCCESSFUL T-BILL
AUCTIONS RAISE NEARLY $2 BILLION


Sensitive but unclassified. Not for internet distribution.


Treasury Auctions Raise Nearly $2 billion;
Yields in Line with Market Expectations
--------------------------------------


1. (U) Treasury raised a total of TL 3.26 quadrillion ($1.97
billion) in two debt auctions on the morning of April 8.
Results were:


Maturity Net Amt Compounded
of Paper Sold (quad) Interest Rate
--------- ----------- -------------


Oct. 8 Bill TL 0.801 57 pct
Apr 24 Bond TL 2.456 62.8 pct


2. (SBU) Comment: The lira appreciated nearly one percent
this morning to TL 1,632,000, and Central Bank reports some
foreign exchange inflows, but the great majority of bids in
these auctions were from local banks. The GOT has now bought
itself a little breathing room, given that the next big debt
payments are April 24 (about $1 billion) and May 7 (about
$2.5 billion). It needs to use this time to reduce T-bill
yields through strong IMF program implementation. End
Comment.


French Delay G-7 Statement of Support
-------------------------------------


3. (SBU) G-7 finance ministers issued a statement of support
for Turkey late on April 7, stating the G-7 strongly welcomes
the signing of the IMF letter of intent and the renewed and
strengthened commmitment of the GOT to advance financial
stability and economic reform. IMF resrep (protect) told us
April 8 am that IMF staff had hoped to have the statement
released earlier, well in advance of today's large T-bill
auctions, but that France had delayed approval of the
statement, for technical rather than policy reasons.


GOT Appoints Two Central Bank Board Members;
Hints at Replacing Treasury Undersecretary
--------------------------------------------


4. (SBU) On April 7, the Government replaced two Central
Bank Board members at the Central Bank's regularly scheduled
annual meeting. The two new Board members are: Durmus
Yilmaz, a Deputy DG of the Central Bank's markets department
and Embassy contact; and Dr. Mustafa Ilker, an economics
professor from Uludag University. Central Bank official
Ikler Domac told us Yilmaz is a religious Muslim, but not
known to be close to AKP and is well respected at the CBT.
The second appointee, Mustafa Ilker is an AKP cadre and close
to MP Nazim Ekren. There are six GOT-appointed Central Bank
board members, each has a three-year term.


5. (SBU) Also on April 7, MinState Babacan commented to
Reuters about the rumors that Treasury U/S Faik Oztrak will
soon be replaced. Babacan said, "There is no definite
decision but that doesn't mean there will not be a change.
There could be a change over the coming weeks." Bloomberg
News Service on April 6, and Sabah newspaper April 8, both
report rumors that the GOT will replace Oztrak shortly.
Oztrak's likely replacement (according to press and our AKP
sources) is Mesut Pektas, PM Erdogan's deputy at the Istanbul
municipality in charge of city finances. He also worked at
al-Baraka Turk Islamic finance house and as a Finance
Ministry inspector.


6. (SBU) Comment: The new government should be expected to
put its own people in key positions, but the timing of the
Oztrak rumors - right before this week's T-bill auctions - is
bad. JP Morgan/Chase Treasurer Gumisdis told us April 7 that
Oztrak is trusted, and getting rid of him at this sensitive
time would not help rebuild market morale. The Central Bank
board replacements should be non-controversial. Market
rumors say AK might use the new Board members to put pressure
on Central Bank governor Serdengecti. However, we will hear
directly from the Governor, if such pressures materialize.
PEARSON

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