New debt notes on the way

Government expected to raise interest on lira bills

The Ministry of Finance is expected to issue two new lira and foreign currency debt notes in October. The value of the new issues has not been declared.

The new notes, both of which will have ten-year maturities, will be used to refinance debt maturing in 2013 and 2014.

Lira-denominated notes are expected to have an interest of 8.25 percent, significantly higher than the average interest on local currency notes which is 6.64 percent. The new Eurobonds issue will have a rate similar to the current average of 6.85 percent.

Banks have been cutting back their subscriptions to sovereign debt due to low interest rates, especially those offered on local currency notes.

Gross public debt stood at around $55.4 billion at end-July, of which 58 percent is in local currency. Commercial banks held some 51.7 percent of lira-denominated debt, while the Central Bank held 31.6 percent.