April 11, 2018 / 8:30 AM / 3 months ago

Turkey CDS rise to fresh 4-1/2 mth highs, dollar bonds fall

LONDON, April 11 (Reuters) - The cost of insuring exposure to Turkish sovereign debt rose to a fresh 4-1/2 month high on Wednesday and dollar bonds fell across the curve as investors fretted about monetary policy and inflation and rising geopolitical tensions.

Turkish five-year credit default swaps rose to 215 basis points (bps) according to data from IHS Markit, the highest level since mid-November, and up 6 bps from Tuesday’s close.

Turkey’s sovereign dollar bonds sold off, with the May 2040 eurobond down 0.36 cents to 100.9 cents, and the January 2041 issue down 0.34 cents to 92.4 cents according to Tradeweb. Both were trading at lows not seen since January 2017.

Investors are concerned about pressure from President Tayyip Erdogan to reduce borrowing costs when inflation remains high, while political tensions in Russia and Syria are also taking a toll, driving the lira to repeated record lows.

The closely-watched current account deficit came in at $4.152 billion in February, below a forecast of $4.2 billion in a Reuters poll, but sharply wider than the $2.566 billion in February last year. (Reporting by Claire Milhench, Editing by Abhinav Ramnarayan)

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