Page 10 - TURKRptOct20

September 25 saw the central bank hike its lira rate at USD-TRY swap auctions with domestic banks to 10.25%, in line with the new main policy rate. It was moved up from 9.75%.
Also on September 25, the central bank provided only Turkish lira (TRY) 5bn in its main funding channel, the one-week repo, in a move that pushed local banks to the overnight borrowing window at 11.75%.
The authority, moreover, did not open a traditional repo auction. The latest rate for such an auction was the 11.59% seen on September 24.
A banker told Reuters on September 25, following the repo auction moves, that he expected a slight rise in the average cost of funding, which stood at 10.69% on September 24, towards 11%.
Some investors were concerned that any signs that policymakers were returning back to the main funding channel would effectively turn the rate hike into a cut, Bloomberg noted on September 25 in a story entitled “Turkey Tightens Monetary Policy Further After Surprise Rate Hike”.
Some investors remained wary that the tightening brought in on September 25 was only temporary, according to Bloomberg.
If policymakers return to offering much higher amounts through the benchmark one-week repo auctions in the days ahead, the weighted average cost of funding could start dropping from current levels, it noted.
"No guarantee"​. "It all depends on the day-to-day funding conditions that they will implement going forward. Even if it is a case of real tightening, how long will it last for? We have no guarantee that the Turkish central bank won’t start reverting to repo funding as soon as the lira enters a more stable path toward appreciation," Cristian Maggio of TD Securities, a long-time lira bear since at least 2018, told Bloomberg.
It is clear that neither an even sharper and real shock rate hike nor some hot money inflows will offer any solutions to the ongoing collapse of the Turkish economy on all fronts.
The lira bears of recent years have always been proven right but they have missed some stunning returns during synthetic relief cycles.
It seems that what is truly going on—starting last week with Ankara’s U-turn away from escalating the row with Greece and Cyprus over rights to explore for gas in certain maritime territories—may be an attempt by the Turkish government to turn policy around to the point that it can trigger some flows of
10​ TURKEY Country Report​ October 2020 ​ ​www.intellinews.com