Turkish five-year CDS plummets to lowest level since February 2021

(MENAFN) On Tuesday, Turkey’s five-year credit default swaps (CDS) experienced a significant drop, falling below 282 points for the first time since February 2021. The CDS, serving as insurance for bondholders, reached 281.75 basis points, marking a notable decline to a level not seen in over three years.

This decline in Turkey’s CDS reflects the positive impact of the government's efforts to mitigate uncertainties surrounding the Turkish economy. These measures have stimulated interest in Turkish lira assets, garnering attention on an international scale.

The proactive steps taken by the Economy management, including a gradual increase in interest rates by the Central Bank of Turkey from 8.5 percent to 50 percent, demonstrate a firm commitment to combatting inflation and stabilizing the economy. Such decisive actions have contributed to boosting confidence and predictability in the Turkish economy, consequently attracting external financing.

Treasury and Finance Minister Mehmet Simsek emphasized the growing confidence in the Turkish economy, noting that it has led to a significant turnaround in portfolio flows. He highlighted that while there was a net portfolio outflow of USD2.9 billion in the first five months of 2023, there was a substantial net portfolio inflow of USD16.8 billion in the period from June 2023 to February 2024.

In addition to these positive developments, on Friday, Standard & Poor's (S&P) upgraded Turkey’s credit rating from B to B+, citing economic rebalancing, and maintaining a positive outlook. Similarly, in March, Fitch Ratings raised Turkey’s credit rating from 'B' to 'B+' with a positive outlook, reflecting growing confidence in the country's economic prospects.

Furthermore, in January, Moody’s revised Turkey’s outlook to "positive" from stable, affirming its "B3" credit rating. These upward revisions by major credit rating agencies underscore the improving economic fundamentals and the government's commitment to fiscal discipline and reform measures.



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