Is April 1 (Monday) bringing back the Turkey shock!? Be careful with window openings!!

The Turkish lira is causing a stir!

What is happening in Turkey?!

This was made as an extension of a chat with Kawa-chan and Oka-chan, turned into a video!

TurkeyD-Daymay be approaching...

◎ Turkey's 10-year government bond

Turkey 10-year yield chart

Looking at the Turkey 10-year yield, it is rising in a way similar to the Turkey shock on August 10, 2018. The yield level hasn't quite reached that point yet, but the speed of the rise resembles the pre-shock movement in Turkey.

◎ Turkey swap rates

Saxo Bank swap rate calendar

Saxo Bank swap rates have become quite dramatic over the past two days!

How to read the calendar: from the left, “date,” “selling swap rate,” “buying swap rate,” and “days accrued.” This calendar is for 10,000 units of currency.

What to watch is that until last week the selling swap was around “-150 yen.” Then the day before yesterday it became “-1,076 yen,” and yesterday it became “-2,982 yen.” If you are selling Turkish lira against the yen for 10,000 units,you incur interest of -2,982 yen in one dayin interest payments. And with accrual days being “1,” if accrual days were “3” on a triple-day,a selling position of 10,000 units would incur about -9,000 yen in interestin total.

That amount is for 10,000 units. For individual investors this is concerning, but for hedge funds or banks, the trade volume is dozens, hundreds, or thousands of times larger. In such cases, actual selling of Turkish lira becomes practically impossible.

◎ Is something happening in Turkey!?

As described above, selling the lira incurs heavy costs, which acts as a deterrent to selling. Of course, President Erdogan is taking measures to curb lira selling, but he is tightening the market with forceful measures against free-market trading.

Last year’s Turkey shock was caused by pressure on the Central Bank of Turkey as it attempted to raise policy rates, making rate hikes impossible. This time, liquidity and rates are being moved forcefully again. Some reports described it as picking a fight with the market. It shows how aggressive the actions are.

◎ Future outlook

There are rumors that when rates fall, hedgers and others will target it. The aggressive actions above will not last long. Therefore, when rates drop, there appears to be a coordinated attempt to short Turkish lira all at once.

So, when will rates drop!?

Many forecasts point to,the Turkish local elections. In the first place, it is said that Erdogan is acting in this way as a campaign measure. By showing that he can stop the lira selling and achieve results, he may be aiming to gain an edge in the electoral race.

This suggests that once the elections are over, rates may be moved back up.

The election is on Sunday, March 31.

If you don’t adjust your positions by the end of this week,there could be a large gap at the start of trading on Monday!

Be careful!