Turkish government’s bond yields drop on Fitch upgrade

Tim Wallace
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TURKISH government debt is no longer junk rated, credit ratings agency Fitch said yesterday, pushing down the country’s borrowing costs.

The state’s falling budget deficit and promising economic growth outlook combined to make the government’s debt a more attractive investment prospect, the agency announced as it raised the rating from BB+ to BBB-, the lowest investment-grade rating.

“The country’s strong sovereign, bank and household balance sheets, and economic and exchange rate flexibility provide important buffers against shocks spreading into a wider financial crisis,” the upgrade noted.

“Fitch estimates the general government debt to GDP ratio will be 37 per cent at end-2012, down nine percentage points since end-2009, while it projects the BBB range median at 41 per cent of GDP, up seven percentage points since 2009.”

The Turkish government’s 10-year bond yields fell 25 basis points on the day to hit 7.82 per cent, as investors flooded into the debt.