Erkan Kilimci’s Post

A very timely two notch credit upgrade of Turkey from Moody’s announced on Friday, the same day we reported that offshore investors have increased their exposure to Turkey’s sovereign local currency debt by more than fivefold this year following the central bank's adoption of orthodox tighter monetary policy to get on top of runaway inflation. Meanwhile, in CEEMEA hard-currency primary supply, the last few weeks have been something of a watershed moment for bank and corporate borrowers from regions that have been locked out of or found it difficult to access the bond market in recent years. Names from Uzbekistan and Georgia priced deals, as did two first-time Turkish corporates. Bankers say more niche credits are in the pipeline, a reflection of the relatively buoyant state of the EM asset class despite net outflows. And Ukrainian state-owned oil and gas company Naftogaz made the amortization payment due under its restructured US$318.5m 7.65% July 2025 bonds on Friday. It was far from certain that the payment would be made, and multiple holders had told IFR that, while they were optimistic about their chances of receiving the money, there was a relatively high risk that they would not. That and plenty more over at: Home | IFR (ifre.com) #CEEMEA #emergingmarkets #bonds #debt #debtcapitalmarkets #Eurobonds #restructuring #fixedincome

Turkey’s return to a more conventional approach to monetary policy is boosting investor confidence, setting the stage for capital inflows and underpinning HSBC Holdings Plc’s bullish stance on the nation’s assets. https://lnkd.in/gDdvpVRV Given the fact that over the years investors have reduced their positioning in fixed income and equities, I think there is a huge room for improvement and that’s why it’s one of our favorite markets, on equities, credit and foreign exchange,” Ulgen said. Investors are too bearish and the currency can outperform lira forward contracts over the year, which translates to “real appreciation,” he said. To be sure, inflows from overseas have remained sparse as foreigners wait to see further progress resulting from the return to policy orthodoxy. Overseas investors have bought just $87 million in Turkish lira debt this year, down from $2 billion last year, according to data compiled by Bloomberg. Total foreign holdings of Turkish government debt in liras are currently about $2.5 billion, markedly down from a peak of more than $70 billion in 2013. The central bank is due to hold its next rate-setting meeting on Thursday, with some analysts already penciling in another hike. Rate setters surprised the market last month with a 500 basis-point increase in a bid to contain prices and stabilize the lira.

There was some potential good news for Ukrainian corporates wanting to use onshore cash to pay interest on foreign currency bonds last week. The National Bank of Ukraine’s governor said on Thursday that, “with the level of international reserves being sufficient, the situation on the FX market being under control, and there being expectations of further international assistance inflows, the NBU is preparing a number of steps to liberalise the FX market in the coming weeks.” FX restrictions put in place as a result of the war to help preserve the country’s foreign currency reserves have been making it difficult for privately owned Ukrainian companies to use their onshore cash to pay interest on bonds. This has forced a number of companies to use cash held outside Ukraine, if they have it, or seek special permission from the government and central bank to use their onshore cash. There are, however, still plenty of reasons to be cautious. If there are quotas or caps on sizes, then it is not clear if any easing of restrictions will also enable corporates to make larger principal repayment and a number of Ukrainian companies have bonds maturing in the next 12 to 18 months. CEEMEA’s primary market was particularly busy last week. More than US$10.3bn-equivalent of US dollar and euro new issues priced, providing investors with quasi-sovereign, corporate and bank risk, across senior unsecured, Additional Tier 1 and Tier 2 bonds and high-yield callable structures. Plenty of coverage of new issues and secondary market stories right here: IFR (ifre.com) #CEEMEA #emergingmarkets #bonds #debt #debtcapitalmarkets #Eurobonds

Two sovereigns captured much of the limelight in CEEMEA last week. Egypt’s surprise interest rate hike and currency devaluation, which paved the way for the International Monetary Fund to expand its loan programme by US$5bn, further boosted confidence in the credit and fuelled a rally in parts of its curve. Given the country's bonds had already been outperforming after news of US$35bn of investment from the United Arab Emirates broke last month, market participants are now trying to assess whether valuations are too stretched and whether Egypt could return to the primary market. Meanwhile, Israel issued its first benchmark since the war with Hamas began in October, having heavily leant on private placements to raise financing internationally over the past six months. Turkey’s improving credit story is gathering pace. Not only did Fitch upgraded Turkey to B+ (positive) from B, citing the country’s shift in monetary policy, last week, but Akbank re-established Turkish banks in the Additional Tier 1 market after the only outstanding bond issue in the market was called earlier this year. The transaction marked another step forward in the comeback of Turkish borrowers in international bond markets following a collapse in issuance in recent years. Banks began issuing senior paper again from September and the Tier 2 sector re-emerged in November and has continued to see activity during the first quarter. Plenty more coverage of new deals and secondary activity over at: Home | IFR (ifre.com) #CEEMEA #emergingmarkets #bonds #debt #debtcapitalmarkets #Eurobonds

IFR’s CEEMEA coverage last week flagged that Nigeria and Jordan are looking at new issues for this year, the former considering something in H1 and also looking at an ESG product. Jordan is said to be choosing between conventional and sukuk. Poland made its largest ever excursion into the US dollar bond market last Monday, raising US$8bn across three tranches. The deal size, while no doubt partially a reflection of the scale of investor demand, also speaks to the country’s soaring budgetary requirements. Turkey took the opportunity last week to diversify its funding with its first euro deal since 2021, capitalising on recent positive news flow and coming at a spread level not seen in years. Some market participants were surprised to see Turkey in the primary market in the run up to local elections, due to be held at the end of March. But the tone around the credit has been growing increasingly positive, providing the sovereign with a window to raise financing. There was also issuance from the Turkish banking sector. TSKB priced an Additional Tier 1 bond 37.5bp back of the previous week’s Akbank deal, but the differential seemed justified given the latest trade's smaller size and the differences in each issuer’s credit profiles. We also dug into the CIS region, where non-Russia-based are playing a more prominent role in supporting the hard currency debt of local sovereigns, such as Armenia and Kazakhstan, and corporates, a welcome sight for a region that has been largely shut out of primary markets over the past two years. Plenty more coverage of new deals and secondary activity over at: Home | IFR (ifre.com) #CEEMEA #emergingmarkets #bonds #debt #debtcapitalmarkets #Eurobonds

Whether complacent investors want to realize it yet or not, global financial fragility is building, as this Yahoo story on Norinchukin Bank indicates. Japan's currency/low--rate dilemma, which has been incubating for over three decades, appears to be on the verge of getting more complicated. Perhaps the lag from interest rates rises is starting to be felt? Could the U.S. as well as the rest of the financial globe really tolerate higher rates for that much longer? Stay tuned as things could be getting interesting. #japan #yen #debt #investing https://yhoo.it/3xpcKtV If things are going to get more interesting, investors, particularly the recently retired and those considering retiring in the near future, need to pay attention. Have you ever heard of the "sequence of return risk"? If you recently retired or are planning to retire in the near future, I highly encourage you to read this article that explains the crucial nature of understanding what "sequence of return risk" really is: https://bit.ly/4e5QOVh

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The Naftogaz 2025s are the emerging markets bonds to watch this week. Holders of the Ukrainian state-owned utility’s restructured notes are grappling with the uncertainty of whether a scheduled amortization payment due on July 19 will be made. The bond was created last year as part of Naftogaz's debt restructuring after the company defaulted in 2022. The payment is a key test of the willingness of the Ukrainian government and central bank to allow large foreign currency payments to be made to external lenders, as it appears Naftogaz has sufficient funds on its balance sheet to cover the liability. All that and more over at: Home | IFR (ifre.com) #CEEMEA #emergingmarkets #bonds #debt #debtcapitalmarkets #Eurobonds #restructuring

A quiet CEEMEA primary market by no means meant we were twiddling our thumbs last week over at IFR. We took a look at how bond investors are becoming increasingly concerned that privately owned Ukrainian corporates that do not hold hard currency revenues offshore will struggle to service upcoming Eurobond maturities after the central bank rebuffed requests to increase US dollar flows out of the country and flagged some of the companies most at risk. Egypt’s bonds were given another leg up from news of further funding coming into the country. Parts of the curve rallied several points after the World Bank Group took the decision to provide more than US$6bn of support over the coming three years to Egypt. In recent weeks, Egypt has received a slew of funding commitments, with the World Bank money taking the total to US$57bn. That figure also includes US$35bn of investment from the United Arab Emirates, US$8bn from the International Monetary Fund and another US$8bn from the European Union. Turkey’s bonds advanced following an unexpected 500bp interest rate hike from the country’s central bank. On Thursday, the central bank increased its key interest rate – the one-week repo rate – to 50%. The move added further weight to convictions that the country will persist in its efforts to bring down inflation. There was also one new issue in the primary market. PKO Bank Polski trimmed back the spread on its inaugural euro senior non-preferred by 40bp last Wednesday, with analysts and investors warming to the strength of the bank's latest results and the credit quality of one Poland’s best-known lenders. Plenty more coverage over at: Home | IFR (ifre.com) #CEEMEA #emergingmarkets #bonds #debt #debtcapitalmarkets #Eurobonds

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