Cristian Maggio, head of emerging markets strategy at TD Securities, points out that in two consecutive announcements, the CBRT lowered TRY rates by 150bps today and was the key event for Turkish markets.
Key Quotes
“The first announcement reduced the 1-week USD-TRY swap rate to 24% from 25.5%. This was shortly after followed by a second announcement that the CBRT restarted 1-week repo auctions today, auctioning TRY16bn at the policy rate of 24%.”
“Both measures are a technical adjustment of the CBRT's liquidity provision mechanisms. However, they also impact the overall stance of monetary policy and have recently been used by the Bank to deliver temporary tightening of short-term rates.”
“Reverting to the 'old' conditions, i.e. prior to 22 March when repo auctions were suspended, will help lower the WACF back to 24% from 25.5%, which is a form of monetary easing.”
“USDTRY reacted with two kneejerk moves up. The lira remains under pressure at the time of writing, trading at around 5.69. Risks arise from a Putin-Erdogan summit today and confusion around the vote recount in Istanbul and Ankara after last week's municipal elections.”
“On 31 May, the mayoral candidates from opposition CHP won for the first time in 25 years the cities of Istanbul and Ankara, but results are being contested by the AKP for alleged irregularities.”
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