Turkish Assets Tumble After Moody’s downgrade to junk - Alldamoney

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Turkish Assets Tumble After Moody’s downgrade to junk

Moody’s, citing rising risks associated with external financing needs and slow economic growth outlook lowered Turkey’s sovereign rating one level to Ba1 late Friday, the highest non-investment grade triggering a Turkish assets tumble and credit risk rising. In August JPMorgan Chase said any downgrade could drive forced selling off as much as $8.7bn in Turkish bonds.

The Borsa Istanbul 100 index tracked by Bloomberg globally posted the steepest decline among about 90 gauges while The currency was headed for the lowest level in eight weeks in late morning trade in Istanbul, also  the nation’s dollar debt due 2026 sank the most since an attempted coup in July. Since the failed coup the cut is Turkey’s second.

Most major asset management companies are betting against the lira

CMA prices show the nation’s $1.5bn debt yield due on April 2026 rose by 27 basis points to 4.55%, and the yield on the government’s 10-year local currency bonds advanced the most in more than two months to 9.96%.And the cost of insuring the nation’s debt for five years climbed to 262 basis points.

To consider an asset for investment many investors require investment-grade ratings from two of the three major rating companies of Fitch, Moody’s and S&P.
Turkey heavily relies on capital inflows to finance its current-account deficits.

And while the rating cut had not yet caused Turkish credit blow up it could place it on a more risky path according to Viktor Szabo, Aberdeen Asset Management portfolio manager who owns some of the country’s bonds and is betting against its currency.

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