Halister News

(Bloomberg) -- CBRT has seemingly postponed proposed monetary-policy simplification given market volatility; now expect first hike in one-week repo rate and lower band of rate corridor to come in June, Guillaume Tresca, senior EM strategist at Credit Agricole, writes in client note.

• However, CBRT is already tightening monetary policy “by the back door”; it will continue to have an active liquidity management policy, pushing up the effective cost of funding for banks to cap inflation and stabilize the TRY
• Governor Basci’s term ends mid-April, while 4 new MPC members will be appointed before end-June; a question mark remains over the process to narrow the rate corridor
• “CBRT’s confusing policy is eroding its credibility further; this will be detrimental to Turkish assets”
• Expects TRY to depreciate further but given the punitive carry, the view is best expressed through rates
  • Recommends 1Y-5Y CCS flattener at -40bps, target 61bps; stop loss -29bps
• NOTE: See related story: Turkey central bank simplification seen after Basci term ends: JPMorgan