Turkey's 5-year credit default swap falls below 300 basis points

The new economic administration that took office following the presidential elections has reduced uncertainties regarding the Turkish economy and increased interest in Turkish lira assets, with these steps also finding a positive response internationally.

The Central Bank of the Republic of Turkey (TCMB) has raised its policy rate from 8.50 percent to 40 percent since the end of May as part of its fight against inflation, while also implementing numerous simplification measures.

These steps have increased interest in Turkish lira assets, and positive statements from international financial institutions continue.

Accordingly, the international credit rating agency Standard & Poor's (S&P) conducted an unscheduled assessment due to recent policy adjustments in Turkey, affirming Turkey's credit rating at "B" and revising its outlook from "stable" to "positive".

Analysts noted that an assessment of Turkey by the international credit rating agency Moody's is expected after markets close on Friday, December 15, and that Moody's could improve Turkey's credit rating and outlook as a result of these developments.

Furthermore, Central Bank reserves have increased by 42.9 billion dollars since the end of May, reaching an all-time high of 141.4 billion dollars.

Total reserves, which have recorded an uninterrupted increase for the last 11 weeks, continue to remain above the 2022 year-end level of 128.8 billion dollars.

The continued decline in dollarization, along with foreign inflows into stock and bond markets, has also recently supported the Central Bank's net reserves.

According to data released by the TCMB today, the total weekly net portfolio inflow for the week of December 8 was recorded at 1 billion 453.8 million dollars, marking the strongest portfolio inflow since July 21, 2017.

As predictability for the Turkish economy has increased, Turkey's 5-year credit risk premium has also entered a downward trend; Turkey's CDS has fallen from the 700 basis point levels seen in May to below 300 basis points for the first time since March 2021, dropping to 299.9 basis points.

Yesterday, in the "CEEMEA Strategy Notes" report prepared by Deutsche Bank, it was noted that carry trade opportunities in the TL have come to the fore, while Bank of America had also previously published a positive report on Turkish banks.

With these developments, the BIST 100 index on Borsa Istanbul, which accelerated its upward trend led by bank stocks, rose by more than 3 percent to exceed 7,750 points.

News Source: 12punto