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Participants in Turkey’s debt market are optimistic that the strong momentum seen in 2025 will extend into the new year, with expectations of continued issuance and refinancing, provided political risks remain contained.
Turkey has issued around $27 billion in bonds so far this year, albeit down from $32–33 billion in 2024. The decline was partly due to political disruptions in March and April, which temporarily stalled issuance. Activity has since rebounded, reflecting a recovery in the business cycle.
“Turkey is seeing a continuation of the busy cycle we saw in 2024. Despite the disruption in March-April, investor confidence remains high. Turkey is a play on picking up yield and spread in a world where rates are headed one way,” said Khalid Darwish, Managing Director, Head of CEEMEA Debt Capital Markets at HSBC.
The emerging market (EM) backdrop has been supportive for the country. Risk sentiment toward EMs has improved significantly driven by a weakening US dollar and the search for value outside of highly priced US assets. Turkey, viewed as a high-yield EM credit with attractive yields and an improving macro story, has benefited from these factors.
“We’ve seen strong fund flows into EM funds, creating a favorable environment. Turkey stands out as one of the few markets with an upward ratings trajectory,” said Alexander Wheal, Director, Debt Capital Markets at HSBC.
Turkey, which had met its 2025 target of $11 billion in sovereign issuances in early September, last week took advantage of the strong tailwind and prefunded with a $2.25 billion 11-year USD bond, where it squeezed the price to 6.80% from 7.15% initial price thoughts.
“Turkey took advantage of favourable market conditions to partially prefund its 2026 financing needs,” said Fady Gendy, fixed-income portfolio manager at Arqaam Capital Ltd. in Dubai.
Risk appetite for Turkey benefited from the recent dismissal by an Ankara court of a case seeking to oust the main opposition party's leader and annul its 2023 congress easing some political tensions.
The latest round of issuance takes the total hard-currency international issuance by Turkish sovereign year-to-date to around $13 billion equivalent (across USD conventional & sukuk, and EUR conventional).
Gendy said the strong demand for Turkish debt comes not only from Turkish local investors and dedicated EM funds, but also from crossover investors—developed market-focused investors from the U.S. and Europe—who are gradually increasing allocations to EMs.
“Turkey’s liquid eurobond market and wide range of issuers make it an accessible entry point,” Gendy said.
The GCC influence
GCC banks are also emerging as key players in Turkey through bond purchases and lending, with institutions such as Emirates NBD, Qatar National Bank, Saudi National Bank, and Kuwait Finance House leveraging their strategic operations in Turkey.
“For GCC banks, it’s a twin diversification play: Egypt and Turkey offer strong demand for banking products and long-term growth potential,” said Darwish.
This trend could lead to more sukuk and conventional issuances, reinforcing liquidity and investor confidence.
“For international investors, even if they initially bought credits at 9–10% yields that is now valued at 7–8%, there’s still appetite to buy at current levels because they know there's more liquidity coming into the region from the GCC,” said HSBC's Wheal.
This growing pool of liquidity from the GCC reinforces confidence and “encourages international investors to continue to be active and not to consider how valuations look a bit rich,” he added.
Fresh impetus could be provided by Asian money coming into the Turkish markets.
“Many Turkish issuers are already asking how they can improve access to Asian liquidity, and that’s likely to be the next step for Turkey. If the sovereign rating moves up to BB+ or higher, it could unlock significantly more liquidity from Asia,” said Wheal.
Banks dominate
Outside of the sovereign, financial institutions have led recent issuance activity, particularly AT1 and Tier 2 instruments. A notable deal was Vakif Katilim Bank’s $500 million AT1 in early October, which attracted $1.6 billion in orders and priced at 8.375%, tightening from initial guidance of 8.875–9%.
“Most bank issuances this year have priced at fair value with limited new issue premium,” said Gendy, whose firm participated in the deal.
Bank issuance is expected to remain strong over the next 12 months.
“Subordinated bonds offer yields about 150-170 bps above Turkish sovereigns, providing a premium without significantly higher credit risk,” said Gendy
Outlook for 2026
Corporate issuance is currently limited but is growing. Outside financials, issuance has been sparse--limited mainly to renewables and cement--due to political volatility which led many corporates to put their plans on hold and then found it difficult pick them up ahead of a narrowing issuance window for the year.
However, inaugural corporate deals are expected to pick up in early 2026. And when it comes to lower-rated Turkish corporates, there is certainly strong interest among both the issuers and investors, the bankers said.
“Investors are increasingly open to exploring new names, and many corporates are actively considering market entry,” said Wheal.
They expect steady growth rather than a sharp surge.
“The current volume of issuance will need to be refinanced, and while some may return to the loan market, most will stay in securities dominated by institutional investors,” said Darwish.
“We don’t anticipate a V-shaped surge, but rather a steady growth trajectory,” he added.
(Reporting by Brinda Darasha; editing by Seban Scaria)
