By inflation in Turkey officially reaches 80% and the country’s currency has weakened, there is pressure on bonds many large Turkish companies and banks. Turkish business they have more than $16 billion in bonds maturing by the end of 2024, but their refinancing options are limited. Dollar-denominated corporate bond yields are averaging almost 12%, while the pound has fallen, losing more than 25% of its value since the start of the year. Thus, Turkish companies, which derive most and in some cases all of their income from the Turkish domestic market, find it increasingly difficult to repay their debt, and their debt is denominated in dollars.

Among the companies whose bonds are under strong pressure is Turkey’s second largest telecommunications company Turk Telekomunikasyon AS. Investors expect a yield of at least 1,000 basis points above the yield of 10-year US Treasuries. These are two issues of interest-bearing bonds expiring in June 2024 and another in February 2025, and according to Bloomberg, their total value is $1 billion. In response to a question from a Bloomberg reporter, the company said it has sufficient liquidity and is considering buying back one of the two bonds. In addition, when asked about it, Turk Telekom, which is owned by the country’s sovereign wealth fund, stated that its borrowing is low compared to normal levels in the global telecommunications industry and that it is able to meet all of its financial and business obligations.

Last week, credit rating agency Fitch downgraded long-term foreign currency debt issued by 25 Turkish banks.

Two subordinated bonds issued by Turkey’s two largest banks, Akbank TAS and Turkiye Is Bankasi AS, are also under pressure. Meanwhile, Erdogan’s government has used unorthodox methods to stem the lira’s fall without raising interest rates, putting Turkish businesses in a very difficult position by banning lending to companies that hold their capital in foreign currencies. According to Yegor Fedorov, an analyst for emerging markets at ING Bank, this increases the risks on the debt of these companies. Last week, credit rating agency Fitch downgraded long-term foreign currency debt issued by 25 Turkish banks. As is usually the case, the house in question justified the downgrade by “political instability and uncertainty caused by the interventionist policies” of the government, as well as, of course, Turkey’s breakneck inflation. Inflation in Turkey has been almost consistently in double digits since the start of 2017 and is at its highest level in nearly 25 years this year due to the cost of energy and goods.