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Bond Market News
Türkiye Upgraded to BB- by S&P
November 4, 2024
Türkiye has been upgraded by a notch to BB- from B+ by S&P. The upgrade reflects improvements in its external accounts, notably a reduction in the current account deficit to about 1% of GDP as of August and a rise in net foreign currency reserves, driven by a successful shift of domestic savings from foreign currency to local currency. Foreign currency deposits now account for 45% of total deposits, down from 58% at the end of 2023, indicating growing confidence in the local currency, though there is still a significant gap between household and market inflation expectations. The Turkish central bank CBRT has raised interest rates significantly, leading to an increase in capital inflows and a modest improvement in the composition of government debt, with a decrease in foreign currency debt. Although external liquidity has improved, financial stability risks remain, particularly concerning the asset quality of banks, many of which have substantial foreign currency-denominated loans. Turkey was upgraded to BB- by Fitch and to B1 by Moody’s earlier this year in September and July respectively.
Turkiye’s 6.625% 2045s traded stable at 87.18, yielding 7.9%.
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