JPMorgan (NYSE:JPM) strategists are holding off on purchasing Turkey's longest-maturity lira bonds until yields reach 35.7%. The team's decision comes in response to the Central Bank of Turkey's recent actions, which have driven the 10-year lira bond index to a record-high yield of over 29%.
The Central Bank's measures include a significant 500 basis point increase in its benchmark rate and a broader move towards market normalization. These steps are seen as a reaction to previous government interventions that had suppressed yields and effectively stalled the lira bond market.
In an effort to attract foreign investors back into Turkey's assets and influence the USDTRY exchange rate, policymakers are gradually easing these restrictions. JPMorgan continues to maintain an overweight position on the lira, taking into account inflation risks, the competitiveness of the lira, and the potential impact of achieving business loan targets.
The report further highlights the end of mandatory government bond-buying, penalties for banks with high lending rates, and interventions in fixed-rate bonds while transitioning towards lira longs. This indicates a shift towards more open market operations and less direct intervention by the government in Turkey's financial markets.
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