Lira Slides, Dollar Bonds Tumble As Presidential Runoff Approaches

(CTN News) – In the wake of Tayyip Erdogan’s lead in the presidential election, the Turkish lira held near a two-month low, its sovereign dollar bonds fell and the cost of insuring the country’s debt spiked.

As of 0655 GMT, the lira was trading at 19.65 to the dollar, its weakest level since a record low of 19.80 was set in March this year following deadly earthquakes.

During the trading session, the stock suffered its worst performance since early November.

A 6.38% drop on the Istanbul Stock Exchange resulted in a market-wide circuit breaker.

Despite both Erdogan’s and Kilicdaroglu’s parties claiming the lead after Sunday’s elections, sources in both camps acknowledge that they may not be able to surpass the 50% threshold for victory.

“This is a major disappointment for investors who were hoping for Kilicdaroglu to win and for him to return to orthodox economic policy,” said Hasnain Malik, Tellimer’s head of equity research.

As a result of the parliamentary vote, Erdogan’s AKP and the People’s Alliance were headed towards a majority, thus Kilicdaroglu would lead a split government regardless of whether he won a runoff.

As a result, the dollar-denominated sovereign bonds issued by Turkiye in the past week have declined by more than 5 cents, while the five-year Turkiye credit default swap spread has risen 105 basis points to 597 basis points, the highest level since November 2022.

Not only will the presidential election decide the future leadership of Turkiye and the direction of the country’s foreign policy, but it will also determine how the nation is governed and how it deals with its deep cost-of-living crisis.

After the third-party candidate Muharrem Ince withdrew from the presidential race last week, Turkish stocks and bonds rallied, boosted by the news that Kilicdaroglu is expected to win the election.

According to analysts, it is expected that the Turkish lira will plummet in the wake of the elections following years of economic imbalance and unorthodox monetary policy.

A recent report from JPMorgan expected the lira to weaken to levels of 24-25 per dollar to the end of the year. Recent days, Goldman Sachs said in a note that it was calculating that the market was pricing the lira to decline by 50% in the next twelve months based on its calculations.

As a result of sugar rush economic policies that led to spectacular boom and bust cycles, rampant inflation and currency market turmoil, the Turkish lira has lost 5% of its value since the beginning of the year, and almost 95% of its value compared to the beginning of the decade and a half ago.

In May 28, there is a possibility of a second round of elections.

SEE ALSO:

Amazon Cuts Costs While Speeding Up Delivery

Srilankan Airlines Says No Outside Funding In The Last Two Years