Spike in TRY Offshore Rates Could Indicate Liquidity Issues

Overnight offshore TRY borrowing rates spiked sharply this morning, rising from around 30% at the end of last week to as a high as 550% today. This marks the highest rate in at least a year and could point to some liquidity issues in some TRY markets following Turkish public holidays held on both Friday and Monday.

Higher offshore borrowing rates has historically made short TRY positions much more expensive and has been used by Turkish authorities to clamp down on speculation. Spot TRY is higher today, with USD/TRY slipping as low as 6.9286 in early London hours.

The gyrations in borrowing rates follow some curious intraday spikes in USD/TRY over the past few weeks, which prompted state banks to sell USD into the rallies. Bloomberg cite some traders as stating today's TRY liquidity has been drained by these state bank trades settling during Tuesday's session.