Barclays trader faces $19m loss on Turkey bonds

Barclays trader faces $19m loss on Turkey bonds
Source: Bloomberg
Date: 17-08-2018 Time: 09:08:33:am

A senior Barclays Plc trader has faced losses of about 15 million pounds ($19 million) on Turkish bonds over the past few days, according to people familiar with the matter.

Tolga Kirbay, a London-based credit trader, was caught on the wrong side of a wager over three trading days starting from Thursday, said the people, who asked not to be identified as the details aren’t public.

Barclays generally makes up to $100 million in revenue each year trading emerging-market corporate bonds in Europe, the Middle East and Africa, according to the people.

While the trade is relatively modest for the British bank overall -- and while the Turkish lira has recovered some of its plunge in the past two days -- it does highlight the growing appetite for risk at Barclays’ securities unit.

It’s unclear whether the positions have been hedged and whether Kirbay recovered the losses.

“Barclays has an established and diversified credit business with all our trading positions hedged across the business,” the bank said in an emailed statement. The Turkish trading operation “represents a very small part of our overall credit business.”

Kirbay, who joined Barclays earlier in the year from French lender BNP Paribas SA, is one of a number of hires the British bank has made for its credit business in the past year and a half as it seeks to take on more risk to chase higher returns.

He traded bonds of Turkish corporates and banks at BNP Paribas, as well as sovereign debt, according to a person familiar with the matter.

Turkish assets have taken a battering after the U.S. sanctioned two ministers in President Recep Tayyip Erdogan’s government in a spat over the continued detention of an American pastor in Turkey, pushing the economy toward a full-blown financial meltdown.

That caused a plunge in the Turkish lira, raised the prospect of a recession and triggered declines in European banks with exposure to the emerging market, including Spain’s Banco Bilbao Vizcaya Argentaria SA.

Some Turkish corporate bonds are down about 50 percent this year, according to Bloomberg Barclays index data. Six of the 10 worst performing bonds in a Bloomberg Barclays index of emerging-market corporates were issued by Turkish firms.

Other investors have been hurt too. The $6.4 billion BlackRock Emerging Markets Local Currency Bond Fund has slumped 6.1 percent in the past week, trailing 93 percent of its peers in that period, according to data compiled by Bloomberg.

The fund, which has declined 14 percent so far this year, has invested in local currency-denominated bonds and instruments of countries such as Mexico, Colombia, Indonesia and Turkey, the data show.

Turkish assets have recovered some value after the meltdown. The lira rose against the U.S. dollar on Tuesday and was up a further 5.5 percent Wednesday at 5:15 p.m. in London.

Barclays Chief Executive Officer Jes Staley has redeployed billions of pounds of assets into riskier and more lucrative trading activities in a bid to boost returns at the investment bank division.

Credit, the business of buying and selling corporate bonds, derivatives and loans, is among the bank’s five “key target areas,” according to a Sept. 2017 presentation.