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Morning Commentary: Turkey improves after rate hike; Saudi Electricity joins calendar
By Rebecca Melvin
New York, Sept. 13 – Turkey’s sovereign and corporate bonds improved on Thursday after the country’s central bank raised interest rates by 630 basis points to combat rising inflation. The move also helped the Turkish lira.
Turkey’s sovereign curve is tighter by 45 basis points to 60 bps, a London-based trader said.
The Turkish central bank raised its main rate to 24% from 17¾%, citing concerns over rising inflation. In June the bank raised rates to 17¾% from 8%.
The move cheered investors, who have worried that the central bank isn’t independent from Turkey’s president Recep Tayyip Erdogan, who has said that he wants to keep rates low at all costs.
Not only did Turkey improve, but the spectrum of EM debt was firmer overall.
Saudi Electricity Co. announced that it plans to sell a dollar-denominated sukuk, or Islamic bond, joining the swelling ranks of Gulf Cooperation Council banks and corporates that are tapping the international market.
Arab Petroleum Investments Corp.’s new $750 million of 4 1/8% five-year senior notes were higher in trade at 100.5 bid, 100.62 offered after that paper priced below par on Tuesday at mid-swaps plus 117 basis points.
Also new to the market is Abu Dhabi-based Al Hilal Bank’s 4 3/8% 2023 trust certificates, which were seen at 100.27 bid, 100.47 offered on Thursday, and Abu Dhabi Islamic Bank’s 7 1/8% new Tier 1 perpetuals that were seen 100.87 bid, 101.12 offered on Thursday after the bank priced the $750 million note on Wednesday.
The lira stood at about 6.17 against the U.S. dollar early Thursday, which was about 5% better on the day.
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