Turkish lira sinking

Central bank continues to cut

Chart of the Day

The Turkish lira has sank in recent days amid concerns of a currency crisis in the country, and the central bank reacted yesterday by taking the very unorthodox approach of cutting interest rates. Normally, countries facing sharp falls in their exchange rates attempt to stem the blood by hiking rates sharply to keep capital in the country - as Turkey’s central bank itself did the last time Turkey faced a similar issue in 2018. With no central bank support in sight, many are concerned about further falls in the lira.

Macro

In South Africa, the central bank raised its policy rate to 3.75% yesterday. The rand has also been weakening lately.

The Philly Fed manufacturing survey rose sharply to 39.0 in November.

Markets

There’s been some pull back among EV stocks, though Tesla is rising higher again.

The S&P 500 rose a bit but followers of Dow Theory will be disappointed to see the fall in the transportation index.

Like some of the more speculative EVs, the cryptos also declined again yesterday.

The MOVE index of implied bond market volatility has been declining again but remains quite high.

The drop in bond market volatility real current trends, with bond yields little changed yesterday after some much larger moves in recent weeks.

Both real yields and inflation breakevens have taken a pause at the 10-year term.

Splitting down that 10-year breakeven though, the market is now pricing in higher inflation in the coming 5 years and lower inflation thereafter.

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