The biggest tumble in Turkish bonds since October 2009 will deepen, sending yields to 10-month highs, as tighter monetary policy spurs foreign investors to cut holdings from record levels, according to Societe Generale.
Overseas investments in Turkish debt reached an all-time high of $37.9 billion on March 11, the last day data from the central bank were available. Money managers bought bonds even as they reduced stock investments to $55 billion from a peak of $74 billion in November.
“There’s a disconnect because the correction has occurred on the equity side but not in bonds,” Benoit Anne, the head of global emerging-market strategy at SocGen in London, said in an interview Tuesday. “We’re probably going to see a reduction of exposure to the bonds. It’s been a very slow response by long-term investors.”
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