Investment in Turkish Debts a Good Bet in Today's Europe

According to rating agencies Turkey has a 1 in 3 chance of being upgraded to investment grade status in the short-term. However, all the major agencies have said the successful implementation of new legislation recently passed by the government is vital -- legislation which aims to reduce the ratio of debt to gross domestic product to 15 percent in the long term from about 49 percent in 2009.

Yet it currently costs the same amount to insure Turkish government bonds against default (1.84% of the bond's value) as it does to insure that of Russia (1.845%), a long-time member of the investment-grade club, and far less than that of Spain (2.48%), Poland or the Ukraine.

While the rating agencies are adamant that default swaps are not an accurate measure of borrowing costs, one can't help but see that Turkish bonds are currently much more appealing than many European countries.

This is hardly surprising, according to Spot Blue, which is currently marketing property in Turkey from as little as £25,000.

"The economy grew 6% year on year in the final quarter of last year, and early estimates are for a growth of twice that in the first quarter, which would put Turkey above China in terms of GDP growth. But it is not just that, it is a matter of choice. Europe is currently an investment kill-zone with new fears now emerging over whether Eurozone banks are hiding debt-balloons. Then you look at Turkey with growth much higher, and a budget surplus larger than has been seen for almost 2 years and it becomes a no-brainer."

Looking at it, there does seem to be a lot less danger of Turkey defaulting on its commitments than most countries in Europe, and this is definitely reflected in the cost of its swaps.

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