Central banks and financial conditions

We see that the US 10-year bond yields decreased to 3.73%. While the Fed meeting is expected and the interest rate run is expected to soften, the 10-year decline continues with a tendency to 3.50%. Meanwhile, Fed presidents are still insisting that interest rate hikes will continue. Minutes of the November FOMC meeting revealed that Fed Chairman Jerome Powell was in the minority on the committee, who believed that federal funds rates were not yet clearly in restrictive territory. Ultimately, the Fed chair is driving the final decision on interest rate policy, and Powell is likely to remind the markets of this.

The ECB continues its guidance that rate hikes will continue. Although the possibility of 75 basis points is on the table, better-than-expected German data and the Fed’s slowdown to 50 bps in December seem to bring the ECB to this point. The Chinese economy, which has slowed down with the US interest rates, continues to pose a problem in Asia.

If we look at Turkish assets; lira is preparing to close with losses for the 11th consecutive month, showing the longest decline in the last 22 years against the dollar. While exports slowed in October, the foreign trade deficit continued to widen. According to Turkstat data, the foreign trade deficit increased by 421.7 percent in October compared to the same month of the previous year and rose to $7.87 billion. The slowdown in export growth drew attention.

USD/TRY remained flat at 18.6366, while the monthly loss of the lira was limited to 0.1%. The 5-year CDS slumped to 534 basis points, approaching the lowest levels since February. Yields on 10-year dollar-denominated bonds dragged their decline to their lowest level since May. Turkey sold bonds this month as the risk premium on dollar debt fell to a one-year low.

The Central Bank cut the benchmark interest rate to 9% for the fourth time in a row on Thursday. With the world’s worst real yield, the Turkish lira is one of the worst performers in emerging markets this year, despite central bank interventions.

Kaynak: Tera Yatırım-Enver Erkan
Hibya Haber Ajansı