Statement from Deutsche Bank on the Turkish economy

Deutsche Bank stated that they continue to believe the expected rally in Turkey's local fixed-income assets is merely delayed and that we should see a significant rally within the next six months.

In its assessment, Deutsche Bank noted that Turkish bonds have struggled in terms of performance in recent weeks, stating, "There are valid reasons to explain why local fixed income has not performed better so far. However, we continue to believe that the expected rally in local fixed-income assets is merely delayed and that we should see a significant rally within the next six months."

According to the report in Dünya, Deutsche Bank pointed out that initially, long-term bonds mostly underperformed in line with their expectations, but recently, an increase in bond yields has also been observed in shorter maturities.

On the other hand, stating that there are five reasons for these developments, Deutsche Bank listed the reasons as follows:

 "-The disinflation process is not smooth.

-The Central Bank implemented aggressive interest rate hikes. The start of the easing cycle has been increasingly pushed back.

-High carry makes foreign currency an attractive alternative. Indeed, 12-month FX implied yields are hovering near 47% - well above current bond yields (between 28.5% and 42%).

-Turkish fixed income is not the first choice to express a bullish view in EMFI. Instead, investors prefer high-beta countries such as CEE or South Africa.

-Expensive valuation: Turkey's local fixed income is not cheap. Looking at our fundamental fair value model, we find 2Y-5Y bonds about 200bps expensive. Only long-term bonds are currently trading near fair levels, also due to the continued underperformance on the curve."