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Exploring Pimco’s Strategic Entry Into Turkey’s Bond Market

EXPLORING PIMCO’S STRATEGIC ENTRY INTO TURKEY’S BOND MARKET

Pimco, a major California-based bond fund manager, has entered Turkey’s bond market, purchasing lira-denominated debt since the second half of 2023. The move follows President Erdoğan’s economic policy shift after the May general election. Pramol Dhawan, head of Pimco’s emerging markets team, notes rising interest rates, tightened fiscal policy, and efforts to encourage local investment in lira, expressing the firm’s positivity towards domestic Turkish assets.

A potential return to investment-grade status for Turkey would signify a remarkable transformation, given concerns pre-election about a balance of payments crisis. Dhawan (head of the firm’s emerging markets team), suggests this upgrade could occur in the next five years if current efforts proceed as planned. Currently rated single B across major agencies, Turkey lost its investment-grade designation in 2016.

Moody’s Investors Service recently upgraded Turkey’s outlook to positive, hinting at a potential lift in its B3 rating. This positive sentiment aligns with investors and analysts’ outlook as Erdoğan’s economic team, appointed in June, reverses unconventional policies, instilling confidence.

The central bank has significantly raised interest rates to cool inflation, attracting foreign fund managers seeking higher yields in Turkish government bonds. The developments mark a substantial shift in perception and confidence in Turkey’s economic trajectory.

The above is for educational purposes only and does not constitute advice. You should always contact your advisor for a personal consultation.

*No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.

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