The move means the bonds are now investment grade, and brings the country in line with Spain, Colombia and India.
The stock market also rallied on the back of the announcement, climbing 1.3% to its highest level since 1988.
Turkey is now rated as investment grade by two of the three main ratings agencies, with Fitch having upgraded the country in November last year. Standard and Poors still rate the country as sub-investment grade.
Strong growth
The re-rating follows a period of strong economic growth in the country, with GDP growing by around 9% per annum until last year.
Increased incentives for citizens to invest in pension schemed and drives to boost the country’s energy efficiency were also cited as key contributing factors.
One UK fund group taking advantage of opportunities in Turkey is Ashmore Investment Management. The Ashmore Turkish Debt Fund was launched for the UK market in February this year. Its performance to date is shown in the graph below.
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The fund invests primarily in local currency sovereign debt bonds supplemented by corporate debt.
Downside
While the upgrade has been met with approval by officials, concerns remain over the speed at which the country is expanding.
Growth is attracting money into the country, which could be pushing the valuation of lira too high and consequently, pushing up the cost of exports for buyers.
On Thursday the Turkish central bank cut its key interest rate by 0.5 percentage points to 4.5%.
