Page 23 - TURKRptMay20

tight—spreads on Turkish banks’ dollar bonds over US Treasuries are close to 1,000bp, their highest since 2018. We warned in an Update that banks are in a poor position to cope with a period of market stress,” Liam Peach of Capital Economics said on April 9 in a note.
“A few quick points are worth making. First, turning to the Fund would be a huge loss of face for President [Recep Tayyip] Erdogan and he would exhaust all other options first. Second, even if Mr. Erdogan buckles, previous IMF assessments of Turkey suggest that there would be a major push for a return to orthodox policymaking. Third, a financing package for Turkey would stretch the IMF’s funding capability. The upshot is that, while talks with the IMF may be opened, sealing a deal would be difficult,” he added.
“I do not see capital controls... So options are: A) SWAP lines with the Fed... but... it has wanted some assurance of [monetary and exchange rate] policy orthodoxy... Turkey... simply does not tick the boxes there. So the Fed would need to be dragged kicking and screaming and by some huge geopolitical ask from Erdogan to Trump, or rather ‘give’ from Erdogan to Trump. Read there S400 backdown [on bringing acquired Russian missile defence systems into operation], purchase of [US] Patriots [missile hardware],” Timothy Ash of Bluebay Asset Management said on April 9 in a note to investors.
“But in the end the US likely would prefer Turkey to turn to B) IMF lending,” he added.
“De facto no swaps”​. In regard to capital controls, Erdogan just cut banks’ offshore swap limits to 1% of equity, so make that "de facto no swaps", while on April 14 he made it obligatory to inform the financial crimes office (MASAK) prior to transferring more than TRY1mn to a foreign country.
He has introduced many limitations on FX trade since March last year, but he's not managed to convince some of his allies that he's achieving capital controls.
5.2.4​ Gross intl reserves
23​ TURKEY Country Report​ May 2020 ​ ​www.intellinews.com