March 13, 2018 / 12:30 PM / 11 days ago

Turkish bonds fall, CDS rise on economy, election concerns

LONDON, March 13 (Reuters) - Turkish assets sold off heavily on Tuesday, with sovereign dollar bond prices down across the curve on Tuesday and debt insurance costs rising as concerns grew about political risks and the state of the economy.

Turkey’s parliament passed a controversial voting law on Tuesday which the opposition said could open the door to fraud and jeopardise the fairness of 2019 polls.

Data earlier this week also showed Turkey’s current account deficit surged in January.

And the conflict in Syria has reached a critical stage with Turkish military encircling Afrin.

“Generally, we are bearish about Turkey,” said Tatha Ghose, an economist at Commerzbank. “Global yields are rising, which is what Turkey is quite susceptible to.”

Turkey’s January 2041 eurobond fell 0.6 cents to 93.74 cents in the dollar, the lowest level since early February 2017, according to Thomson Reuters data.

The April 2043 issue also fell 0.5 cents to 80.3 cents in the dollar, the lowest since end-January 2017.

Turkish five-year credit default swaps rose 5 basis points (bps) from Monday’s close to 174 bps, according to IHS Markit data, a one-week high.

The Turkish lira fell to a record low against the euro and hit its weakest against the dollar since December.

“The lira’s sell-off was triggered by the higher than expected current account deficit published on Monday – a timely reminder of Turkey’s reliance on capital inflows to cover its substantial gap,” analysts at Rabobank said in a note.

Reporting by Claire Milhench; additional reporting by Tom Balmforth

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