July 12, 2019 / 9:21 AM / 4 days ago

Turkey dollar bonds slip to three-week lows on sanction worries

LONDON, July 12 (Reuters) - Turkey’s dollar bonds dropped to three-week lows on Friday as the delivery of the first parts of a Russian-made missile defence system raised concerns that the United States might impose some sanctions.

Longer-dated issues bore the brunt of the selling, with the 2040 issue dropping 0.67 cents, according to Tradeweb data.

The cost of insuring exposure to Turkish sovereign debt also rose, with the country’s 5-year credit default swaps adding 6 basis points from Thursday’s close to 403 basis points, according to IHS Markit.

“Today that (missile system) is the topic,” said one analyst who asked not to be named. “It is nothing surprising though and it has been baked in over the last month.”

“It seems like there will be some lightweight sanctions but nothing too extreme - nothing that really hurts the relationship between the two countries,” he said, adding that measures against the Turkish arms industry was one obvious option. (Reporting By Tom Arnold and Marc Jones;)

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