Turkey's five-year credit default swaps (CDS) on December 2 dropped to the 233-level, the lowest figure observed since May 2018, Bloomberg reported.

Soon after May 2018, Turkey's economic and financial crisis ignited.

The yield on the Turkish government’s 10-year eurobonds remained below the 7%-level as of December 2.

250-level broken?

Since the first quarter of 2024, the CDS instrument has mainly moved in a corridor between 250 and 300 thanks to the appointment of an "orthodox" economic team led by finance minister Mehmet Simsek in June 2023.

Some exceptions have been observed. For instance, the CDS hit the 370s in April this year after Istanbul mayor Ekrem Imamoglu, the chief political rival of Turkish President Recep Tayyip Erdogan, was arrested in March.

Since October, the CDS have been signalling a breaking of the lower end of its two-year-long corridor.

In the global CDS league, Turkey’s rivals are Egypt, which has a CDS level hovering in the 300s, and Russia, the indisputable leader, at war and under sanctions, with a CDS level standing in the four digits.

Simsek-Albayrak-Elvan-Nebati-Simsek

Turkey’s critical economic descent began with the appointment as economy czar of Berat Albayrak, the elder son-in-law of the president, Erdogan. He replaced Simsek in July 2018.

The USD/TRY pair, currently traded in the 42s, was hovering in the 4s at the time.

An economic U-turn was observed with the appointment of an "orthodox" team, including finance minister Lutfi Elvan, in November 2020. However, this situation only lasted to December 2021, when Nurettin Nebati became finance minister.

No threat

The current "orthodox" management led by Simsek has been in charge for two and a half years. There is no sign as things stand that they might face dismissal in the near future.

As a real "orthodox" player who built a career in the finance industry, ex-Wall St banker Simsek has very much applied a single policy, namely providing the finance industry with an attractive real return.

He has also hiked indirect taxes and prices controlled by the government, while limiting salary hikes, cutting the bill of the low-income masses. Thanks to the political situation in the country, there is no social reaction that threatens Simsek’s post.