Türkiye's 5-year credit default swaps plunges to over 2-year low

By Muhammed Said Tanil

ISTANBUL (AA) – In a positive sign, Türkiye's five-year credit default swaps (CDS) dipped to an over two-year low on Tuesday.

Analysts said this was led by the release on Tuesday of cooler-than-expected US inflation data, which boosted expectations that the Federal Reserve would end its cycle of rate hikes, besides Türkiye's measures to ensure price stability.

US annual consumer inflation decreased to 3.2% in October from 3.7% in September, according to figures released Tuesday.

Türkiye's CDS – a form of insurance for bondholders – dropped 14 basis points to 364.64, its lowest level since March 2021.

Analysts noted that Türkiye's steps taken to fight inflation have eased uncertainty over the future, albeit gradually.

In addition, Türkiye's simplification moves also affected the pricing of Turkish assets while falling inflation around the world and the expectation that major central banks will abandon hawkish policies put downward pressure on risk premiums.

In October, the Turkish Central Bank hiked its policy interest rate by another 500 basis points to 35%, meeting the market forecast.

Over the course of five monetary policy meetings, the bank has been gradually increasing the rate, also known as the one-week repo auction rate, from 8.5% in May to 35% last month.

Commenting on the CDS data, Treasury and Finance Minister Mehmet Simsek said Türkiye's new economic program will bear fruit by the second half of 2024, which will further strengthen investor confidence and attract the global fund flow to the country.

"This will limit the downside risks to the short-term growth outlook of the disinflation program," Simsek wrote on X.