Turkey Undeterred By EU Sanctions Threats

• Local & USD rates Unch this morning following a sustained move lower across the curve in yesterday's session off the back of a 475bp CBRT rate hike which soothed investor nerves substantially.
• 10Y yields now approaching YTD lows at 5.40, while the 15Y trades below the 6.50 handle around 6.387
• USD/TRY moved lower post-CBRT, but failed to breach the 7.50 handle. The overall interpretation of the CBRT meeting was positive given the market-aligned 475bp hike and added bonus of all funding being channeled through the 1w repo - further simplifying the policy framework.
• The CBRT also improved forward guidance saying "the tightness of monetary policy will be decisively sustained until a permanent fall in inflation is achieved" - signalling a clearly hawkish stance and commitment to further measures should price pressures fail to be contained.
• Focus shifts to incoming price data for signs of moderation or continued upside pressures that could see the hike followed by more tightening or a once-off hike.
• USD/TRY remains rangebound for now between 7.50-7.60, but most sell-side institutions see a move lower towards 7.40-7.30 in the near-term.

Local news

• Germany escalates sanctions comments towards Turkey after Merkel reiterates EU summit review of Turkey's inflammatory actions in the East Med and Cyprus at the EU Summit (10 Dec) - Daily Sabah.
• Arms embargoes and an end to the customs union have been called for over the past weeks, with most commentators expecting Turkey to not be deterred by EU threats- Erdogan to attend business conference exhibition in Istanbul (8am GMT) - bbg