​The import of Erdogan’s Bloomberg interview

TURKEY - In Brief 15 May 2018 by Atilla Yesilada

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Tuesday’s panic attack in TL assets is now a world-leading story, which deserves little description. I also agree with the view that it is largely to be blamed on Erdogan’s controversial comments regarding interest rates, CBRT and the Hakan Atilla-cum-Halkbank case in the US. I am writing this personal commentary to warn investors that bigger shocks might be underway, and to put Erdogan’s comments in a broader perspective. Erdogan not the only reason While TL asset crash coincided with broad global press coverage of Erdogan’s interview with Guy Johnson of BloombergTV, there were clearly other factors conspiring to deepen it. Rising Dollar Index and US 10- year bond yields triggered a general exodus from EM.Moody’s and Fitch issued negative remarks on Turkey’s credit outlook.March CAD exceeded consensus, while financing was very poor. Later in the afternoon, rumors of US getting ready to slap a large fine on Halkbank, and possibly other Turkish banks began to circulate, adding to the general mood of unease. The article which might have precipitated the fear about sanctions at Ahval News is linked here and does not contain new information, only a personal opinion. It is important to understand that Turkish markets are facing a Perfect Storm to underscore my thesis that unless strong counter-measures are taken, the panic attack can morph into a full-blown confidence crisis or run on the TL, exhausting CBRT’s meager F/X reserves in a jiffy. Hakan Atilla case Readers ought to consider the implications of Judge Berman handing down the maximum sentence to former Halkbank CEO Mr. Hakan Atilla, as well as the specter of Congressional sanctions because of the ongoing detention o...