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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
TURKEY
- Turkey sovereign default risk has been gradually falling in the past three months despite the TRY trading at historical lows against the US Dollar; 5Y CDS is down nearly 100bps since its March 30 high to 386bps.
- The chart below shows the presence of a 'Jump Process' in the 5Y CDS, where any exogenous shocks or political events are usually associated with a significant surge in Turkey risk premium.
- For instance, when Erdogan decided to fire both CBRT governor and deputy governor in the end of March, the 5Y CDS jump by over 180bps to a local high of 482bps.
- The CBRT decided to leave its interest rate unchanged at the last meeting (June 17) despite rising inflationary pressures; next CPI prints will be key for policy outlook.
- Historically, Erdogan has been known to pressure the CBRT to pursue easy policy to stimulate the economic recovery as uncertainty remains elevated in Turkey.
- Even though market participants have criticized Erdogan's recent 'quote' on 'lower rate will reduce inflation', some economists must have warned him that running an aggressive tightening cycle to curb inflation risks when uncertainty is extremely elevated increases the probability of entering into a prolonged period of recession.
Source: Bloomberg/MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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