December 20, 2019 / 11:57 AM / a month ago

EBRD plans swap trade in 2019 in boost to new Turkish reference

ISTANBUL, Dec 20 (Reuters) - The European Bank for Reconstruction and Development (EBRD) has said it will make a large overnight indexed swap (OIS) trade before year end via Turkey’s new reference rate for lending, boosting a market Ankara hopes will offset a London alternative.

The EBRD has already extended, in Turkish lira, a financing package to Enerjisa Enerji worth $100 million supporting improvements in Turkey’s electricity network, the first EBRD loan linked to the new benchmark, the bank said.

The Turkish Lira Overnight Reference Rate (TLREF), developed by the government, Borsa Istanbul and other market participants, is expected to become the reference rate for corporate lending in Turkey.

It has been pitched as a safer alternative to an over-the-counter lira swap market in London popular among foreign investors for hedging bets in Turkish assets.

But the London market has been hamstrung since March, when traders said Turkish state-owned banks withheld lira liquidity and swap rates soared well above 1,000%.

Turkey aims to use the TLREF to increase the lira’s presence in financing tools.

“We are planning at least one big long-term OIS transaction before year end,” said Abdessamad Abouti, a senior EBRD trader. “For next year...we are in discussion with other clients for similar structures, so the volume will be dependent on that but we are optimistic.”

International banks are optimistic about incorporating TLREF products to their balance sheets, Abouti said, adding that the volume of the local market is expected to exceed transactions made in the London market. (Writing by Ezgi Erkoyun; Editing by Jonathan Spicer)

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