The Lira and Turkish bonds plummet on the eve of the second electoral round
The second round of the Turkish presidential elections will be held on May 28, the one that will pit the current president Erdogan against Kemal Kilicdaroglu representative of the secularist and Kemalist party. Today's decision by the Central Bank of Turkey not to change interest rates, keeping them at 8.5% in the face of much higher inflation, has certainly not helped.
We recall that the Turkish Central Bank does not act in coordination with the government, it obeys the government, also because the two previous governors were quickly sacked precisely because they did not obey Erdogan's orders. We could say that this was the latest indication of the outgoing (or incoming) government's monetary policy, which could not go to the elections with a rate hike.
This has sunk the Turkish Lira powerfully, which has been in free fall for some time anyway. Now it takes 20 Lire to buy a dollar:
Even in a longer time perspective, the current level of the Lira remains remarkable
The situation of political uncertainty affects not only the Lira, but also the Dollar bonds issued by the Ankara government, such as the following
The fall in value since the day of the first electoral round is clear, but even more significant is the fall in volumes traded. The market is literally dead for these bonds, at least in anticipation of the elections, while the CDS have risen, indicating their riskiness.
The indications from the markets seem to point to a confirmation of the current president Erdogan and his economic policies as more probable, with no curb on inflation in the short term, but with an emphasis on low and expansive interest rates. It is not known with what success.
Thanks to our Telegram channel you can stay updated on the publication of new articles from Economic Scenarios.
The article The Lira and Turkish stocks plummet on the eve of the second electoral round comes from Scenari Economici .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-lira-e-i-titoli-turchi-precipitano-alla-vigilia-del-secondo-turno-elettorale/ on Fri, 26 May 2023 14:46:29 +0000.