May 22, 2013 / 4:37 PM / in 5 years

Turkish dollar, euro debt to join some Barclays global indices June 1

LONDON, May 22 (Reuters) - Turkish sovereign dollar- and euro-denominated bonds will join a group of Barclays global indices on June 1, following Moody’s decision last week to award the country its second investment grade credit rating.

Barclays will include 24 Turkish sovereign hard currency bonds with a market value of $57.2 billion in its Global Aggregate Index, a spokeswoman for the bank said on Wednesday. Turkey will comprise 0.14 percent of the index.

Barclays does not disclose how much investor cash is benchmarked to its indices.

In addition, Barclays will include 18 dollar issues worth $44.5 billion into its U.S. Aggregate and U.S. Credit indices, while six euro-denominated Turkish bonds with a value of 6.4 billion euros will enter the Euro Aggregate Index, Barclays says.

Turkey last week was elevated to investment grade by Moody‘s, following on a similar decision late last year by Fitch. That second rating potentially opens it up to investment by more conservative funds that are only allowed to buy investment grade-rated assets.

Analysts are divided over the actual impact on inflows, noting that most investors have already piled into Turkey whose local debt yields are at record lows and dollar bond yields are now lower than Brazil.

“Markets tend to react way, way before the actual event happens. When the actual event happens, it tends to be a non-event or even a negative,” said Alia Yousuf, head of emerging markets at ACPI in London.

Others say more inflows are likely, especially given Turkey’s relatively high yields compared with the Western bonds that dominate global indices.

“Potentially, the more indices you are included into, the broader the set of investors who will be interested in buying your bonds,” said Alexander Perjessy, senior economist at asset manager AllianceBernstein in New York.

The country’s bonds are already included in JPMorgan’s dollar and local currency emerging debt indices, tracked by 80 percent of emerging market investors, but Perjessy said:

“(Global indices are) a different league to emerging market indices, it’s a much broader pool of money.”

Turkish local debt is still not eligible for the key bond index run by Citi, the World Government Bond Index (WGBI) which is tracked by $2 trillion. That would require its local currency debt to be rated a much higher A-\A3 by S&P and Moody‘s. (Reporting by Sujata Rao and Carolyn Cohn; Editing by Toby Chopra)

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