Türkiye’s 5-year credit risk premium (CDS) decreased by 17 basis points to 268 basis points.
Following the temporary ceasefire between the USA and Iran in the Middle East, which also includes Israel, the positive trend in the international bond market is pulling down Türkiye’s borrowing costs.
US President Donald Trump, in his announcement regarding the negotiations held under the mediation of Pakistan, hours before the deadline given to Iran, stated that the negotiations carried out between the two countries under the leadership of Pakistani Prime Minister Shahbaz Sharif and Pakistani Chief of General Staff Asim Munir had yielded positive results.
Stating that he accepted Pakistan’s proposal to stop possible attacks tonight and open the Strait of Hormuz, Trump said, “I agree to suspend bombardments and attacks against Iran for a period of two weeks. This will be a bilateral ceasefire.” he said.
Claiming that he has already achieved his military goals in Iran and stating that they are close to an agreement on a “long-term” peace with Iran, Trump said, “We received a 10-article offer from Iran and we believe that this is a feasible basis for negotiation.” made his assessment.
With these developments, the US 10-year bond interest decreased by 8 basis points to 4.24 percent, the 2-year bond interest decreased by 9 basis points to 3.73 percent, and the 5-year bond interest decreased by 9 basis points to 3.86 percent.
With the decline in bond interest rates in international markets, Türkiye’s CDS decreased by 17 basis points to 268 basis points. Türkiye’s CDS, which was at 235 basis points before the US and Israel’s attacks on Iran, rose to 327 basis points in March.
It is predicted that capital flows to developing countries may strengthen with the decline in US 10-year bond interest rates, one of the most critical reference indicators in the global financial system.
During the war, the Central Bank of the Republic of Türkiye (CBRT) took effective steps to prevent significant movements in foreign exchange markets. The CBRT demonstrated its ability to take rapid measures regarding reserve management and liquidity tools.
While banks are re-engaging in swap transactions with the CBRT, this shows that there is no foreign exchange liquidity problem in the system and that the applied exchange rate regime is functioning properly.
CBRT, which started Turkish Lira Swap transactions against foreign currency in order to provide flexibility to banks in Turkish lira liquidity management, aims to prevent volatility on both the credit and interest sides with this step. Turkish Lira Swap transactions aim to relieve the pressure on the Turkish lira.
With this measure, the Turkish lira congestion in the markets will be prevented and banks will be prevented from experiencing liquidity problems. Thus, loan conditions will become more reasonable.
While this step is considered an important development in terms of both supporting Turkish lira liquidity in the banking system and strengthening foreign exchange reserves, the CBRT aims to increase liquidity in the market by purchasing foreign currency from banks and giving Turkish lira in return.
Analysts stated that markets are more willing to price positive developments.
