Page 9 - TURKRptDec21

Expectations for the December 16 decision currently stand at a 100bp cut.
If the speculation suggesting that Erdogan wants a monthly mortgage rate of 1% proves correct, a 12% policy rate (banks’ funding cost) would be below the annual compound rate of about 13% that the 1% monthly rate implies.
On November 18, the central bank said that it plans to complete its rate-cutting cycle on December 16. A 300bp rate cut would bring the policy rate to 12%.
November 18: Cut by 100bp to 15%. October 21: Cut by 200bp to 16%. September 23: Cut by 100bp to 18%.
● January 20: First rate-setting meeting in 2021 will be held.
● Lira loans flow: So far, no notable surge has been observed but the action is beginning. Borrowers may wait until the rate-cutting cycle ends to obtain the lowest rates the cycle produces.
● USD/TRY: Latest record - 13.8760 recorded on December 1.
The feasible limit for the pair is currently found somewhere up in the sky but get ready for something of a U-turn somewhere along the way, likely involving the firing of the latest central bank governor.
The government still has some control on the currency.
Turkey’s 5-year credit default swaps (CDS), meanwhile, surpassed the 500-level.
● Balance of Payments: For August and September, the central bank released current account surpluses, if you buy it. As winter is coming, December will bring stronger real outflows in the trade account.
Financial flows stopped; as a result, they are stable. There is not much hot money left. The game is played out only among locals. Turks are jittery again as the USD/TRY rate is shooting up.
The current account deficit will be watched as the tourism season ended in disappointment.
It was early in November 2020 when it dawned on the government that it did not have the firepower to continue defending the lira. A sharp U-turn that brought in a new central bank governor triggered hot money inflows from abroad. On March 19, the governor was fired.
Since a new rate-cutting cycle was launched on September 23, the reserves and firepower to defend the lira are in the spotlight again. However, everyone is so bored of this repeating movie. Those who do not have to do lira business just ignore Turkey, its currency and papers.
● Eurobond auctions: Stopped since September. There are some small-cap candidates seeking chances, including Turk Eximbank, Sekerbank (SKBNK), Albaraka Turk (ALBRK), Guris Holding, Calik Holding, Istanbul Municipality, Aktif Yatirim Bankasi and Nurol Holding.
In January or February at the latest, the Turkish Treasury rides the new year rally and takes its slice from fresh portfolio allocations for the new year by selling eurobonds.
9 TURKEY Country Report December 2021 www.intellinews.com