Cred t retracement on a h ke
Rebecca Klausen, strateg st, Deutsche B.
Turkey’s fore gn exchange and nflat on numbers have exper enced b g sp kes th s autumn and the (geo)pol t cal news flow has only served to worsen th s s tuat on. Aga nst th s backdrop, our local econom cs team was n Ankara early last week and left w th the mpress on that the Central Bank s runn ng out of opt ons to stab l ze the currency as de from a s gn f cant rate h ke. If you bel eve further currency weakness as TRY-USD levels break 4.00 would serve as a tr gger for the bank to act, th s p ece recommends how to pos t on for that as a cred t nvestor. Also, although Turkey CDS tself does not seem extremely w de vs ts h story when cons der ng the w den ng vs other BB cred ts n the reg on the current move s noteworthy. Market pos t on ng s also short Turkey r sk, and thus the trade should show asymmetr cal payoff n the case of good news. Th s trade s ntr ns cally l nked to FX, so trade t m ng s dependent on see ng further weakness n the FX market. (Nov. 22)