US embassy cable - 03ANKARA1630

UNCLAS ANKARA 001630 
 
SIPDIS 
 
 
SENSITIVE 
 
 
STATE FOR E, P, EUR/SE AND EB 
TREASURY FOR U/S TAYLOR AND OASIA - MILLS 
NSC FOR QUANRUD AND BRYZA 
 
 
E.O. 12958: N/A 
TAGS: ECON, PREL, TU 
SUBJECT: TURKEY'S ECONOMY MARCH 14: MARKET WORRIES MOUNT IN 
ADVANCE OF MARCH 18 AUCTION 
 
 
Sensitive but unclassified, and not for internet 
distribution. 
 
 
1.  (U) Turkish financial markets in morning trading March 14 
are beginning to reflect the concern that the U.S. financial 
package is off the table.  The benchmark lira T-bill rose two 
percentage points to close at 60 percent compounded.  The 
lira depreciated one percent, now trading at TL 1,650,000 to 
the dollar (yesterday's close was TL 1,633,000).  The 
Istanbul Stock Exchange closed down 1 percent in the morning 
session. 
 
 
2.   (SBU) Turkish market contacts tell us the market 
downturn is in the beginning phase.  As JP Morgan/Chase 
trader Gumisdis said, "The ranks of the believers (in the 
U.S. package) are thinning, but no package is not priced in." 
 He sees interest rates in the March 18 debt auctions (before 
the $3.2 billion redemption on March 19) in the 63-65 percent 
range. 
 
 
3.  (SBU) Also on March 14, General Manager of Akbank (the 
largest holder of Turkish debt) Zaafer Kurtul told us the 
March 18 auction rates will easily reach 65 percent, given 
the current uncertainties about the U.S. package.  He added 
that there is still some expectation  about the U.S. package, 
and as it becomes clearer to everyone that the package is 
off, then interest rates would continue to climb from the 65 
percent level.  Kurtul was uncertain himself on the status of 
the U.S. package, but worried with reports that U.S military 
ships were leaving  Turkish waters and headed to the Suez 
Canal. 
 
 
4.  (U) At noon March 14, Turkish media published two reports 
that will affect afternoon trading: 
 
 
--  AKP Chairman Erdogan told the press that "it is possible 
that the new government list (of Cabinet members) will be 
presented to the  President today." (Comment: this may give 
markets hope that the new GOT will move to pass a second U.S. 
troop deployment quickly.) 
 
 
--  Turkish TV news channel NTV reported that in Secretary 
Powell's Congressional testimony March 13 the Secretary said, 
"In this context, the package (of financial aid for Turkey) 
is now not on the table." 
PEARSON