Turkey’s currency and financial market performance has been hampered by misguided policy decisions.
- The country seems to be caught in an inflation/currency depreciation spiral. The lira plunged 44% compared to the USD in 2022, and CPI inflation hit 36% in December.
- The deteriorating currency could make it uninvestable, but there appear to be opportunities in the darkest moments.
- The yield on 10-year USD denominated Turkish Government bonds is at 8.0% as of January, 7th as the 5-year yield is now at 7.8%. The yields are more than enough cushion in case Turkey defaults.
The yield on local currency 10-year government debt is 23.0%, way above 1.8% in the United States, signaling a nice cushion compared to future currency depreciation.
TRY USD down -1.13%