UPDATE 1-Turkey's dollar bonds sink, CDS rise, as post-election rout extends

·2 min read

(Adds CDS drop, further fall in bonds and quote)

LONDON, May 17 (Reuters) - Turkey's dollar-denominated sovereign bonds slid further on Wednesday, and the cost of insuring government debt against default rose, as the post-election market rout following President Tayyip Erdogan's strong showing extended into a third session.

The fresh declines brought the nation's dollar bonds to their lowest in at least six months, while the cost of insuring exposure to Turkey's debt via credit default swaps (CDS) rose to a seven-month high.

The selling kicked off as Turkey's main opposition party said it had filed complaints over suspected irregularities at thousands of ballot boxes in Sunday's landmark election, and as Erdogan sharpened his tone against migrants before a run-off.

"We could see CDS rise to 900 bps or above that – which is where we were trading in July last year – and if we assume that the currency would have to depreciate towards the same levels after adjustment for inflation, we talk about the lira at 30 or 31 to the dollar," said Gustavo Medeiros, head of research at Ashmore. "That is a rough approximation, but a pretty good ballpark."

After an unexpectedly strong performance in which he secured just under the 50% of the votes needed to win outright, Erdogan is in pole position to win the May 28 run-off vote.

CDS jumped 25 basis points from Tuesday's close to 682 bps, data from S&P Global Market Intelligence showed. It was around 480 bps before the election.

The bond maturing in 2036 fell the most by Wednesday afternoon, a 3 cent drop, Tradeweb data showed.

Longer-dated issues maturing 2041 now broadly trade below the 70 cents on the dollar, a level some analysts view as distressed territory. (Reporting by Karin Strohecker and Libby George; editing by Marc Jones and Alex Richardson)