Turkish government forces banks to lend to the treasury –  report

Turkey’s ruling Justice and Development Party (AKP) asked three major banks to help the Treasury’s borrowing drive, Bloomberg reported.

Bloomberg quoted three sources with direct knowledge of the matter claiming that major banks have been forced to bid for more bonds than required in their roles as market makers in debt auctions. One source said that a similar request also came from the government before.

The news article did not mention whether the banks answered the government’s order but detailed that banks shares are increasing in the tenders.

Bloomberg said the Turkish government increasingly intervenes in the market and the move comes amid a fiscal splurge that has widened Turkey’s budget deficit.

“Turkey’s annualized budget deficit widened past a record 100 billion liras ($16.5 billion) in April and the government’s immediate borrowing needs are growing. The Treasury is scheduled to borrow 11 billion liras in June and 19.5 billion in July, the most since February,” Bloomberg reported.

According to the Central Bank of the Republic of Turkey, overseas investors sold more than $2.6 billion of local-currency government bonds this year and share in the market reduced to record low rate of 13%. In 2013, foreigners’ shares were 28 percent.

Turkey’s Ministry of Finance and Treasury completed the domestic borrowing program on May 14 with two tenders as borrowed total 7.58 billion lira which 5.83 billion lira from the domestic market.

Turkish government interfered London Swap market before the 31st March local election to keep the Lira strong and made it virtually impossible for foreign investors to sell the lira.

The Turkish election board’s order to rerun the Istanbul election and tension between the U.S. and Turkey over Ankara’s order of Russian S-400 Missile System put pressure on Turkish currency and Lira continues to weaken against Dollar.

Turkey’s foreign reserves drain to all time low of 2019 – Financial Times  

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