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Dip in USD/TRY Does Little to Alter Trend, Yields on USD Bonds Close to YTD Lows

TURKEY
  • Considering the CBRT substantially surprised market expectations, the move lower in USD/TRY has been somewhat modest with the pair still higher on the month overall and above initial support at the 20-day EMA at 31.8020 - though intraday losses for the pair have amounted to the most since August. But even with the repo rate now standing at 50%, real rates remain deeply negative given headline inflation is running comfortably above 60%, with inflation expectations still at elevated levels.
  • Moves in Turkey’s USD bonds have been more noteworthy, with yields across the curve down 25-40bps and at 2-month lows.
  • Turkey’s 5-year CDS have dropped 15bps – the greatest decline this year – though today’s ranges for the contract are nevertheless contained within yesterday’s extremes.
  • The Borsa Istanbul index dipped in the immediate aftermath of the decision, but eventually more than reversed the CBRT-inspired move. The index remains above the 9000 handle and above the 50-DMA which has been touted as a key support level. Intraday gains in the Banking Sector Index have been more pronounced, up as much as 6% to record a new all-time high.
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  • Considering the CBRT substantially surprised market expectations, the move lower in USD/TRY has been somewhat modest with the pair still higher on the month overall and above initial support at the 20-day EMA at 31.8020 - though intraday losses for the pair have amounted to the most since August. But even with the repo rate now standing at 50%, real rates remain deeply negative given headline inflation is running comfortably above 60%, with inflation expectations still at elevated levels.
  • Moves in Turkey’s USD bonds have been more noteworthy, with yields across the curve down 25-40bps and at 2-month lows.
  • Turkey’s 5-year CDS have dropped 15bps – the greatest decline this year – though today’s ranges for the contract are nevertheless contained within yesterday’s extremes.
  • The Borsa Istanbul index dipped in the immediate aftermath of the decision, but eventually more than reversed the CBRT-inspired move. The index remains above the 9000 handle and above the 50-DMA which has been touted as a key support level. Intraday gains in the Banking Sector Index have been more pronounced, up as much as 6% to record a new all-time high.