Turkey’s dollar bonds dropped across the curve due to a stronger-than-expected support for the incumbent, Erdogan after the first round of elections. The presidential election now moves into a second round runoff on May 28 as neither Erdogan nor his rival, Kemal Kilicdaroglu secured an outright majority in the first round. Markets took the news as a negative as Erdogan won 49.5% of the votes while Kilicdaroglu got just under 45% support. This would imply that Erdogan has the momentum and thereby a stronger chance of winning the second round than his rival. 

Paul Greer, a PM at Fidelity said the results “shocked the market and left many participants on the back foot”. Other analysts note that credit spreads are expected to widen, with a pessimistic view on Turkish assets and a further depreciation in the Lira. Erdogan’s rival had promised to reverse many of the current economic policies, and set an interest-rate policy similar to other countries with an “autonomous” central bank chief.

Its 9.375% 2033s issued in January dropped ~8 points from 104.9 to 97 cents on the dollar.

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