Turkey and EURUSD [C]
Jeffrey:
Monetize your bulish view on the two to pick up yield with short duration via a EURUSD DepositPlus (sell USDcEURp and collect premium). if assigned. (lip to EUR on deposit
spot ref: 1.38705
EURUSD Deposit Plus (USD on deposit)
Tenor: 1month
Strike: -1.3573
Yield: 4.5% annualized (paid in USD)
Note the uptick to longer-dated sovereign periphery credit: ex: Portugal 3.35% 10/15/15 -2.92%
Consider 35-10mm USD in Southern Financial
Source: DB Autobahn, 12/24/13
Tazia Smith
Director | Key Client Partners - US
Deutsche Bank Securities Inc
Deutsche Asset & Wealth Management
"Passion to Perform"
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Foreigners Unload Turkey Bonds as Probe Tarnishes Erdogan Growth
This has been prepared solely for informational purposes. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. It is based on information generally available to the public fron sources believed to be reliable. No representation is made that it is accurate or complete or that any returns indicated will be achieved. Changes to assumptions may have a material impact on any returns detailed. Past performance is not indicative of future returns. Price and availability are subject to change without notice. Additional information is available upon request.
Foreigners Unload Turkey Bonds as Probe Tarnishea Erdogan Growth
2013-12-27 IS:16:34.235 GMT
By Selcuk Gokoluk and Ksenia Galouchko
Dec. 27 (Bloomberg) Foreigners are dumping Turkish bonds at the fastest pace in two years, deepening a selloff that's putting a blot on Prime Minister Recep Tayyip Erdogan's image as the architect of the country's economic turnaround.
International investors pared their holdings of Turkish debt by $532 million to a three-month low of $53.8 billion in the week through Dec. 20 after selling a net $1.38 billion the week before, the central bank said yesterday. They've cut their holdings from a record $72 billion in May.
The outflows are a reversal of the investment that helped. finance Turkey's growth during Erdogan's 10-year stint, a period in which nominal gross domestic product more than tripled and the country's dollar bonds posted an average 9.7 percent annual gain. A corruption probe that has ensnared his cabinet and led to three ministerial resignations is damaging his reputation and adding to a three-month rout in the lira that was triggered in part by the country's widening current-account deficit. "It significantly undermines the facade of economic
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compotonce that the administration has so carefully constructed in recent years,' lachaol shaoul, the chief executive officer of marketfield Asset Management LLC in Now York, which oversees about 517 billion, said in e-mailed come/mita.
7he lira weakened as much as 2.3 percent to a record 2.1764 amain:it the dollar today, before trading at 2.1581 as of 5:06 III. In Istanbul. A 3.1 percent retreat In the currency this week has taken its 2013 drop to 17 percent, the moat among pears In emerging Europe, the Middle East and Africa after South Africa's rand.
Bonds, Stocks
7he lira also plunged as much as 3.5 percent to a record 3.0151 per ouro today, while yields on the government's two-year notes jumped 44 Deals points, or 0.44 percentage point, to 10.17 percent. 7ho rate is up 402 basis points this year, the moat among 20 emerging-market peers monitored by Bloomberg after Brasil. The Borsa latanbul main index fell 1.3 percent today, sot for the iowest level since July 2012.
Polies detained sons of the economy, interior and environment ministers, as wall as the chief executive officer of Turkiyo Balk Bankaal AS on Doc. 17 in probes into bribery, money laundering, gold smuggling and corruption in government tenders. All throe ministers resigned, with Environment and Urban Works Minister Erdogan aayraktar urging Erdogan to atop down as he approved the projects ho carried out.
"Go Downhill'
Erdogan said the probe amounted to an attempted coup. He told reporters on a return flight from Pakistan on Dec. 24 that his son may be targeted to tighten the political noose around him. Kemal Kilicdaroglu, leader of the opposition Republican People's Party, told CNN-Turk television that Erdogan has formed a "war cabinet" with the appointment of his undersecretary Efkan Ala as Interior Minister.
"Things are only going to go downhill from here," Aleksei Belkin, who helps manage about $4.5 billion in assets as chief investment officer at Kapital Asset Management LLC in Moscow, said by phone. "The Turkish market now combines investors' worst fears: political uncertainty and the current-account deficit."
7ho government projects the current-account deficit will widen to 7.1 percent of gross domestic product for 2013 from 6.1 percent a year earlier. When the gap jumped to a record 10 percent in 2011, the lira tumbled 18 percent.
Greater Volatility
Erdogan said the probe is backed by international forces uncomfortable with the speed of Turkey's oconomic development. Me replaced 10 ministers in his 26-member cabinet earlier this week, parting ways with those implicated in the probe. Ho appointed his deputy minister Bokir Boadag as justice minister to lead the legal battle as tension increases between the government and followers of a U.S.-based imam, Fothullah Guiana who roll out with Erdogan lately and who aro influential in the judiciary and police forces.
"People like to have stability and they have to like
predictability in what's going to happen,' Pablo Clailino, money manager at Stone Harbor Investment Partners LP Which oversees 555 billion in emerging-market debt including Turkey bonds, said in a telephone interview from NOW York. "SO all oe this volatility, accusations and stuff like that going on are obviously not a vary helpful environment."
For Related News and Information: Turkey stocks Slump With Lira as Minister Urges Erdogan to Cult NSN MYDDBE67TDSO
--With assistance from Bon Bain in Mexico City and Ye %le in NOW York. Editors: David Papadopouloa, Daliah Warsaw,
To contact the reporters on this story:
Selcuk Gokoluk in Istanbul at 490-212-317-3907 or
agokoluklbloomborg.net,
Kaenia Galouchko in Now York at +7-499-271-3389 or
kgalouchkolebloomberg.not
To contact the editors responsible for this story:
Claudia Maedler at +971-4-364-1025 or
cmaedler@bloomberg.net;
Nojciech Moskwa at +48-22-433-4475 or
unoskwa bloomberg.net
Jeffrey:
Called to get your views on Turkey. Depending your views, consider simple implementations on weakness, including short-term sovereign debt (TRY denominated) ex: TURKGB 8.3% 10/7/15 offered -9.7% and TUR (iShares ETF tracking MSCI Turkey Investable Market Index, off-22% since 10/25). Our KCP desk has seen a pick-up in interest this week on the back of news flow that I'm sure you know better than most (existing political unrest compounded upon by accusations against of bribery, gold smuggling, and money laundering against government officials, the replacement of half the cabinet, upcoming elections in 2015, and debate around FX intervention going forward to fight TRY depreciation). DB Global Emerging Market (GEM) Research highlights that, at present levels, the major risks for Turkish equities are priced in (full report attached, Bloomberg article below).
If you agree with the asymmetric upside risk to Turkish equities (broadly) consider: $250k position in TUR (to start) in Southern Financial.
If you agree with a reverson in credt spreads anda mean reversion from the latest leg in TRY sell-off. consider: 2mm (-Sinnusd worth) of short lain sovereign notes in Southern Trust the aware, they
trade thin)
Happy to show FX structuresaround TRY anat., ether debtfequity solubons as well.
Separately, the EURUSD bounced back up to 1.38 this morning. Curious if you remain bullish and, if so, you had an opportunity to review the deposit plus strategy (works best if EURUSD bounces within a range not as good of entry point here, but worth watching for entry point if you decide you it matches your view).
Speak with you soon,
Tazia