Global interest rates are bound to go up fast
▶ Christine Lagarde calmed the European bond market a bit, but there is still nervousness. The ECB may not raise the interest rate before September, and this is what the majority of analysts believe. However, the markets seem to think it can happen at any moment.
▶ Already, the usual culprits – Greek and Italian government securities – were sold off last week. In the U.S. there is a liquidity gap in both equity and bond markets, so bid-ask spreads widen. Yes, it may have already begun.
▶ Let’s call it the Fed effect. The Fed is a large ship, like a galleon of the early 17th Century. When it turns, it turns slowly but the liquidity it commands is huge. All rates will go up in 2022.
▶ Actually, money is pouring out, not in. Investors are pulling money from EM stocks and bonds. The Institute of International Finance (IIF) has found that the level of the exodus of funds – excluding China – is the highest in a year.
▶ In an environment where investors are beginning to calculate even the slightest of risks, it isn’t a good idea to visit London’s financial circles. If you can’t impress them, which obviously you can’t and you didn’t, the consequences can only be bad.
▶ Nobody can. Even the ‘official’ inflation stands at 48.69% and is set to go up further, possibly to 60% by the end of April. Yet the policy rate is 14%, and TL deposit rates hover around 19%. E Nobody will save when the real TL interest rate is at minus (negative) 30%. Even if they do, they won’t keep their savings in TL assets. If Turks don’t do that, how come one can convince overseas investors?
▶ The currency-guaranteed deposit option’s fate hangs in a balance as I pen this comment. The first round of contracts will mature in late March-early April. As for the corporate contracts, we will see by the end of this week if the tax incentive works.
▶ I think the government understands the severity of the situation, but it believes there will be a large foreign currency influx in the tourism season, which will save the day. It is a bet on timing, nothing more.