Morgan Stanley Forecasts Lowest Risk Premium for Turkiye Since 2018

Preparations Underway for Turkiye’s Third Foreign Borrowing of the Year

Morgan Stanley’s latest note on Turkiye’s upcoming borrowing highlighted a significant revision in the country’s risk premium target, marking its lowest level since 2018. The firm reiterated its advice on risk premiums related to Turkiye’s eurobond issuance.

According to their assessment, Morgan Stanley recommended a sell position with an entry level risk premium of 262 basis points and set a target of 217 basis points. If achieved, this would represent the lowest risk premium recorded since 2018.

Details from Bloomberg HT revealed that Neville Z. Mandiminka, Morgan Stanley’s strategist, anticipated a yield range of 7.23% to 7.30% for Turkiye’s 8-year eurobond issuance, bolstered by strong potential demand supported by technical and fundamental outlooks.

The note highlighted key factors such as shelving wage increases in June, a greater-than-expected decline in annual inflation for June, removal from the gray list, and potential credit rating upgrades by Moody’s as significant contributors to the positive outlook.

Currently, Turkiye’s CDS stands at 261 basis points, reflecting the firm’s cautious stance on the country’s risk premium. Should Morgan Stanley’s target materialize, Turkiye’s risk premium would reach its lowest point since early 2018, when it dipped below 170 basis points.

In parallel, the Treasury and Finance Ministry is gearing up for Turkiye’s third dollar-denominated borrowing of the year, authorizing BNP Paribas, Citi, JP Morgan, and Standard Chartered for the issuance of 2032 maturity eurobonds. Initial yield expectations for the 8-year eurobond issuance hover around 7.625%.

Source: Patronlardunyasi / Prepared by Irem Yildiz

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