Bloomberg News

Turkish Bonds Rally on Prospect of Higher Government Tax Revenue

June 01, 2011

June 1 (Bloomberg) -- Turkish bonds rallied, sending yields down the most in six weeks, after Deputy Prime Minister Ali Babacan said the government could receive $36.5 billion from a tax restructuring scheme.

Two-year debt yields dropped eight basis points, or 0.08 percentage point, to 8.86 percent at the 5 p.m. close in Istanbul, according to the TEB local benchmark bond index. That’s the biggest drop since April 21. The main ISE National 100 index rose 0.3 percent to 63,224.65. Turkey’s lira strengthened for a third day, gaining 0.2 percent to 1.5902 per dollar.

Turkey may get as much as 58.3 billion liras ($36.5 billion) in payments for tax and social security contributions made under a government debt restructuring offer, CNN Turk television reported, citing Deputy Prime Minister Ali Babacan. The central bank said today it detected a slowdown in credit growth and wants to track data for a “while longer” before deciding whether more action is needed to reduce the increase in lending.

“The bonds’ rise was due to the central bank statement and the tax offering that strengthens the Treasury’s hand,” Bulent Topbas, a portfolio manager at Strateji Menkul Degerler AS in Istanbul, said in e-mailed comments.

The Treasury could receive extra annual revenue of at least 1 percent of gross domestic product between 2011 and 2013, Yarkin Cebeci, an Istanbul-based economist for JPMorgan Chase & Co., said in a note to clients. Babacan said the government aims to use the bulk of the revenue to reduce debt.

The central bank expects an improvement in the foreign trade gap, excluding energy, to begin in the second quarter of the year, the bank in Ankara said in the minutes of the May 25 meeting at which it left the benchmark one-week repo rate unchanged at 6.25 percent. An improvement in the current-account deficit won’t be seen until the last three months, it said.

--Editors: Linda Shen, Ana Monteiro

To contact the reporter on this story: Selcuk Gokoluk in Istanbul at sgokoluk@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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