The Turkish central bank’s plan to attract hard-currency inflows is getting negative reviews from some international money managers.
The proposal would provide interest-free lira funding for investors to buy local bonds with a guaranteed 4% return in dollar terms, though discussions are ongoing and details could still change, Bloomberg News reported April 28.
That return isn’t high enough and the two-year lock-up period is a deterrent given the raging inflation facing Turkey, according to fixed-income portfolio managers.
Here’s what money managers and strategists are saying:
Paul McNamara, GAM UK:
“4% isn’t a remotely competitive rate for Turkish risk in U.S. dollars as you get 5.5% on a eurobond with a few months to run. So that makes it a lira play — with inflation on fire and the government apparently uninterested in reducing it, which is also unattractive. Looks to me as if the primary market would be Turkish money anyway.”
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