Bloomberg News

Turkish Five-Year Credit Default Swaps Trade Near Two-Year High

November 24, 2011

Nov. 24 (Bloomberg) -- The cost of protection against Turkish default traded near a more than two-year high after Fitch Ratings cut the outlook on Turkey’s default risk to “stable” from “positive” yesterday.

Five-year Turkish credit-default swaps rose to 319 basis points, according to data provider CMA. That’s nearing the 321 level reached on Sept. 26, the highest since April 2009.

Near-term risks to Turkey’s economy have increased as “Turkey faces the challenge of reducing its large current- account deficit and above-target inflation rate,” Fitch said yesterday. The ratings company affirmed Turkey at BB+, one level below investment grade, while Standard & Poor’s and Moody’s Investors Service rank the country two levels below.

Turkey’s credit default swaps traded for as little as 118.3 basis points in November 2010.

Credit default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.

--Editors: Ash Kumar, Linda Shen

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To contact the reporter on this story: Benjamin Harvey in Istanbul at bharvey11@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net -0- Nov/24/2011 07:56 GMT


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