25 Aug 2023

Turkey's Aggressive Rate Hike Triggers 5-Year CDS Drop!

The Turkey Central Bank has taken a significant step in its battle against inflation by implementing a supersized rate hike of 750bps, bringing rates to 25%. This move was unexpected, as the market had anticipated a more "modest" hike to 20%. Turkish fixed income assets have responded positively, with the Turkey 5-year CDS retreating below 400bps. Even Turkey's US Dollar-denominated bonds saw a boost from the news. With the Central Bank of Turkey adopting a more orthodox approach to its monetary policy, the question arises: can they successfully bring inflation back to reasonable levels? To provide context, the latest inflation figure for the month of July was at a staggering 47.8%... Source: Bloomberg

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