Two US funds recently bought Turkish assets

The short-term external debt continues to rise

Reuters reported that Pimco and Vanguard invested in Turkish assets in anticipation that Turkey would maintain high interest rates.

US fund management companies Pimco and Vanguard, which manage around $10 trillion in investments worldwide, have added Turkish lira-denominated assets to their portfolios after orthodox policies and large interest rate hikes following the elections.

Responding to questions from Reuters, the two firms said they were more positive on Turkey after Recep Tayyip Erdogan won the presidential elections again, followed by a sharp return to orthodox monetary policy, including interest rate hikes.

Although Pimco and Vanguard did not disclose the size of the bonds they bought, the investments are an important sign of the “confidence” that has begun to rebuild after years of foreigners exiting Turkish bonds.

“We are positive on Turkish assets, especially TL-denominated assets, given the tightening of financial conditions to rein in spending and contain inflation and the gradual easing of regulations that have led to asset price distortions,” said Pramol Dhawan, head of emerging markets at Pimco, which manages a portfolio size of about $2 trillion.

Nick Eisinger, a manager at Vanguard, the world’s second-largest fund management company with a portfolio size of about 7.5 trillion, said they added Turkish bonds to their portfolio late last year “without hedging”.

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