Foreign Money Floods Türkiye as CDS Falls to Six-Year Low

(MENAFN) Türkiye's persistent disinflation campaign and economic strategies that have driven the nation's credit default swap to multi-year lows are fueling heightened foreign investor appetite for Turkish lira-denominated assets, analysts report.

Notwithstanding ongoing global economic headwinds, Türkiye maintains its inflation reduction trajectory, with projections indicating further deceleration in price growth during upcoming periods. A weakening US dollar combined with falling crude oil prices are presently bolstering the disinflationary process, with their beneficial effects anticipated to intensify over the near term.

The Turkish Central Bank's monthly market survey reveals that 72 participants representing real and financial sectors now anticipate year-end inflation will moderate marginally, with the Consumer Price Index projection adjusted downward to 23.23% from 23.35%.

International appetite for Turkish lira-denominated assets has intensified amid enhanced regional strategic positioning and diminishing borrowing expenses. Türkiye's five-year CDS has maintained a declining trajectory since September of the previous year, dropping to 204.5 basis points on Jan. 5—marking its lowest threshold since May 2018. Analysts observed that a modest increase subsequently occurred following minor escalation in regional geopolitical strains.

International Capital Accelerates Bond and Equity Acquisitions
Foreign institutional buying activity in both fixed income and equity markets has demonstrated considerable strength in recent weeks. Non-resident investors, excluding overseas branches of Turkish banking institutions, have recorded net purchasing positions for 10 successive weeks.

During the week of Jan. 9, non-residents acquired $766 million in bond instruments and $138.5 million in equity securities. When incorporating overseas branches of Turkish banks, foreign investors executed their most substantial government debt securities purchases since the week of Aug. 15, 2025.

Consequently, non-resident equity holdings climbed to $36.3 billion for the week of Jan. 9, 2026, while foreign ownership of government debt securities expanded from $18.4 billion to $19.2 billion.

Analysts indicated these developments have strengthened anticipations that inflation will sustain its downward trajectory, reinforcing the favorable momentum in the bond market and expanding the Turkish Central Bank's capacity to implement monetary policy accommodation.

The benchmark July 14, 2027 bond, transacted on the Istanbul Stock Exchange Bond and Bill Market, continued its yield decline initiated in November 2025, reaching 35.98%—representing its lowest point in nearly 26 months.

Economic forecasters' projections have similarly evolved. Anadolu's survey conducted prior to the Turkish Central Bank's Monetary Policy Committee meeting on Jan. 22 revealed that three of 46 respondents anticipate a 100-basis-point rate reduction, while 42 project a 150-basis-point cut. The median forecast indicates a 150-basis-point decrease, positioning the policy rate at 36.5%.

Internationally, the US Federal Reserve is still projected to maintain rate reduction measures throughout this year, providing support to equity markets in developed economies. Analysts suggest emerging markets could capture even more robust demand, delivering comparatively superior returns under prevailing conditions.

They noted that the rally on the Istanbul Stock Exchange could extend as investors pivot toward higher-risk assets concurrent with domestic rate reductions, and that interest in Turkish lira-denominated assets will likely continue ascending if credit rating agencies implement additional upgrades to Türkiye's credit rating or outlook assessment.

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