(Bloomberg) -- Some of the world’s largest investors are taking a fresh look at an unloved Turkish bond market that could prove to be next year’s biggest...
-- Some of the world’s largest investors are taking a fresh look at an unloved Turkish bond market that could prove to be next year’s biggest bright spot in the $8 trillion local debt universe of developing nations.
“Under these circumstances, Turkey’s local debt could become the 2024 trade of the year for emerging market debt investors,” he said.Turkey’s 10-year government bonds were trading at 28.4% as of 11:46 a.m. in Istanbul on Monday, while two-year bonds traded at 38.3%. A reversal in investor sentiment toward Turkey is conditional on a rate increase to at least 40-45%, coupled with a weakening in the lira to around 30-33 per dollar, according to Sergei Strigo, co-head of emerging-market debt at Amundi, Europe’s largest money manager. Stabilizing inflation that’s now running at near 62% is also crucial before investors make significant commitments, he said.
Strategists at JPMorgan Chase & Co. have said they see fair value of the 10-year lira notes at around 35.7% and will “stay sidelined” until they hit that level. Turkish authorities won’t ease a cap on overseas lira supply in the near-term, according to people familiar with the matter, since that would risk an increase in short-selling. But limits on swaps deals also create a dearth of liquidity that leaves foreign investors unable to hedge their exposure to lira assets by borrowing the currency from local lenders.
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