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03 November 2019

Turkey mulls Euroclear tie-up to boost demand for local bonds

The initiative is aimed at making it more attractive for foreigners to buy the securities and is being coordinated by Borsa Istanbul.


Turkey plans to use Euroclear, one of the world’s biggest central security depositories, to settle transactions in its local-currency bond market, reported Bloomberg.

Moving the bond settlement process to Euroclear could make trading in Turkish local-currency debt cheaper and more efficient for foreign investors. Currently, they have to channel bond transactions via banks in Turkey.

Foreign funds sold more than $3.1 billion dollars worth of Turkish government bonds this year. Their share in the market has more than halved since 2013, falling to a record low of 12 per cent this month.

The outflows come ahead of a heavy debt repayment schedule next year that threatens to strain government finances and pile pressure on bonds.

Last week, the Treasury said that it plans to raise 50 per cent more debt in 2020 than its projections for this year. The more aggressive borrowing target comes after a spending spree amid back-to-back elections and an economic slowdown that hit tax revenue in 2019.

Other emerging markets have also been looking to boost debt demand through Euroclear membership. In October 2019, Egypt’s Finance Minister Mohamed Maait said he hopes to conclude a deal with the company in January.

Since joining Clearstream, another major clearinghouse in May 2019, foreigners have lapped up Ukraine’s local debt, increasing ownership from about one per cent to 12 per cent.





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