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Bond Market News
Turkish Companies Reach Highest Levels of Foreign Currency Debt in 5 Years
March 12, 2025
Turkish companies are said to be increasingly relying on foreign-currency loans, with this trend being driven by high domestic interest rates increasing the relative attractiveness of FX loans. The Turkish central bank has kept its benchmark rate above 40% to control inflation, making local borrowing costly. In contrast, FX loans carry significantly lower weighted-average interest rates—around 6% for euro loans and 8% for dollar loans, compared to 55% for commercial lira loans. The central bank’s hawkish stance is expected to keep any lira depreciation steady. However, analysts have also raised a historical precedent for caution. In 2018, foreign-currency loans made up 65% of Turkey’s GDP with the lira losing about 30% of its value. For instance, in January, policymakers lowered the monthly growth limit on foreign-currency loans from 1.5% to 1%, which was cut further to 0.5% in March. While President Erdogan’s policies have led to a strengthening of the lira, analysts predict that tighter lending restrictions will slow the growth of foreign-currency loans in the coming months. They also note that the latest series of interest rate cuts may see the attractiveness of foreign loans decline.
Turkey’s dollar bonds were trading stable with its 6.125% 2028s at 100.24, yielding 6.05%.
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