ANKARA- Turkey saw strong demand in its return to the international bond market on Wednesday, with a $2 billion Eurobond three-times oversubscribed, in a higher-yielding issuance seen as a test for restoring investor confidence following a currency crisis.
Turkey's lira has fallen some 35 percent this year, hit by concerns about President Tayyip Erdogan's grip on monetary policy and a diplomatic rift with the United States.
But there are some signs of recovery. A Turkish court last week freed a U.S. evangelical Christian pastor who had been on trial on terrorism charges. The preacher, Andrew Brunson, had been at the heart of the diplomatic stand-off and his return has helped push the lira to its firmest in two months - since the height of the crisis.
Turkey's Treasury said it priced the five-year Eurobond at 7.5 percent. That compared to the 6.2 percent it paid on a 10-year Eurobond in April and the 5.2 percent on another 10-year Eurobond in January.
It also had to pay a higher premium over U.S. Treasuries, with the spread rising to 4.475 percentage points from 2.667 percentage points in January. The sale was another sign of "normalisation" for Turkey, said Timothy Ash of BlueBay Asset Management.
"Positive development - should provide something of a benchmark for banks/corporates to re-access international capital markets, helping with USD liquidity," he said in an emailed note.
U.S. investors bought 60 percent of the issuance while 34 percent was bought by investors from Britain and other European countries, the finance ministry said.
Turkey has now borrowed $6 billion in Eurobonds so far this year, largely completing the planned 2018 external borrowing programme, with U.S. interest growing in each of the three issuances.
The lira's sell-off worried investors about the fragility of the economy, which is reliant on foreign debt.
Banks are seen as particularly vulnerable, because of both their own external financing and the likelihood that the crisis will cause more firms to default on debts at home.
(Reporting by Nevzat Devranoglu; Writing by Ezgi Erkoyun Editing by David Dolan) ((ezgi.erkoyun@thomsonreuters.com; +90-212-350 7051; Reuters Messaging: ezgi.erkoyun.thomsonreuters.com@reuters.net;))
