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6/14, 10:58 PM (Source: TeleTrader)
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Moody's sends Turkey deeper to junk territory

An increase in the risk of a crisis regarding the balance of payments was cited by Moody's Investors Service on Friday in an announcement that it slashed Turkey's long-term issuer ratings and left the outlook negative. The already noninvestment or junk grade was taken lower by one step, from a speculative Ba3 to a highly speculative B1. The senior unsecured bond rating and senior unsecured shelf rating were changed accordingly, as was Hazine Mustesarligi Varlik Kiralama AS, the issuer of sukuk lease certificates.

On the flipside, the credit appraiser highlighted the "fundamental credit strengths" in the large and diversified economy and moderate government debt. The report points to high reliance on external capital flows and expressed doubt the country can attract sufficient levels for repayment and economic expansion. The repeated mayoral election in Istanbul could spark a political crisis, the agency stressed.

"Foreign exchange reserve buffers are weak and Moody's expects them to weaken further over the next two years relative to economy-wide short-term liabilities... Most government measures, including those targeting the banking system, continue to be focused on the near-term priority of propping up economic activity at the expense of eroding the underlying resilience of the economy and its banking system to external shocks, in part by increasing its fragility to shifts in market sentiment," the report adds.

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