Turkey’s CDS hit 2-year low after late liquidity window rate hike

By bne IntelliNews April 27, 2017

Turkey’s 5-year credit default swaps (CDS) declined to 214bp, the lowest level since July 2015, following the central bank’s unexpected decision on April 26 to push the late liquidity window rate up by 50bp to 12.25%Reuters reported on April 27, citing data from IHS Markit.

The rate hike was seen as giving the regulator additional flexibility in the event of future depreciation pressure on the lira from continued inflation risks. Annual inflation hit an 8.5-year high of 11.29% in March.

The average yield spread on Turkey’s USD-denominated Eurobonds over US Treasuries has declined to 291bp, the lowest level since mid-2016, while 10-year domestic bond rates have declined to five-month lows, according to Reuters.

On April 27, the Turkish lira gained 0.30% d/d against the USD to 3.5664, while the benchmark BIST-100 index was down 0.25% to 94,282.

Turkish equities experienced an outflow of $111mn in the week ending April 21, central bank data also showed on April 27. Total inflows since the start of the year top $1.08bn. 

The regulator also reported an inflow last week of $41mn into government debt securities. There has been an overall inflow of $1.10bn since the beginning of 2017.

NON-RESIDENTS' HOLDINGS OF EQUITY AND GOVERNMENT DOMESTIC DEBT SECURITIES ($ mn)
(Market Value) 21/04/17 14/04/17 07/04/17 31/03/17 24/03/17 17/03/17 10/03/17
STOCK              
EQUITY 42,319.10 41,190.80 39,663.90 40,588.40 41,308.00 40,877.40 39,676.10
GDDS (*) 27,081.50 26,812.90 26,209.80 26,253.50 26,442.50 25,503.80 24,917.90
Repo 2,259.50 2,245.70 2,202.70 2,283.20 2,304.00 2,173.10 2,130.80
Private Sector 852.9 844.9 833.7 831.5 826 805 881.8
NET TRANSACTIONS (Adjusted for Foreign Exchange and Market Price Effects)              
EQUITY -111.3 173.3 116 -101.9 -58.5 44 -94.3
GDDS (*) 40.6 80.2 487.3 149.8 398.8 -58.1 354
Repo -4.1 5 -35.5 0.9 86.2 -0.3 119.2
Private Sector 8 11.2 2.1 5.5 21 -76.7 13.2
source: tcmb

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