The Turkish lira, bless its heart, is rallying again on Thursday, gunning for a third day of gains in a bid to claw back some of the losses from the currency’s second worst week in 24 years.
We’re now basically back to levels seen before the bottom fell out in earnest last Friday, thanks in part to a crackdown on swaps and also thanks to a $15 billion lifeline Qatar tossed to its ally in Ankara on Wednesday.
It also helps that Angela Merkel has reportedly stepped in to (basically) say that Germany isn’t going to let Turkey descend into chaos (clearly, that could potentially worsen Europe’s immigration crisis). Erdogan and Merkel spoke by phone on Wednesday, the Turkish Presidency said in statement.
(Annotating the lira’s wild ride)
But despite the lira’s gains, Turkish equities are having a decidedly difficult time finding their footing. After gaining as much as 1.5% early, the Borsa Istanbul 100 subsequently reversed course, diving more than 2%. It’s in a bad way:
According to the locals and also according to broker activity data, “The Dude” has been hard at work pushing things around lately. A local legend, “The Dude” is apparently a group of HFTs acting through Yatirim Finansman, and although “he” was a big buyer earlier this month, he was apparently a net seller to the tune of something like $120 million in Turkish stocks on Wednesday. As you can see from the bottom pane in the chart above, stocks fell more than 3% in Turkey on Wednesday despite the lira’s massive gains.
In any event, here’s a notable statistic about Turkish equities: 30-day volatility on the Borsa Istanbul 100 surged to more than 32% on Thursday – that would be the highest since the failed coup attempt in 2016.
As for Turkish debt, Goldman rather dryly notes that “certain maturities of sovereign debt (currently BB-rated) now trade wide to CCC-rated US corporates on a yield basis.”
Falling knives, anyone?