Let’s see if the Turkish situation stays local or if the risk off spills over to other related markets and eventually spreads to developed markets. We have witnessed some massive moves over past 12 hours.
The Turkish lira is in free fall and was at one stage 80% weaker YTD. These are absolutely amazing moves that will make risk managers sweat, making them adjust VaR models that will affect hedging and reshuffling of risk in the coming days.
The Turkish ETF (TUR) is plunching today. Note the huge volume day today.
Implied volatility of the TUR ETF is spiking massively. With implied vol of 65% for the Turkish ETF people price approximately 4% daily moves going forward. This is extreme for any index.
The entire Emerging Market FX space is feeling the pain. JPM Emerging FX index is plunging massively.
It is pointless watching Turkish charts in local fx terms. Below is the Istanbul index in USD.
The two biggest banks, Garanti and Akbank, both in free fall. Both charts below are USD denominated.
The Turkish 10 year continues moving parabolically, reaching a yield of 22% today!
Anyone short Turkish assets is obviously having a great Friday, but there is one more player probably enjoying the Friday beer with an extra smile, Greece.
Turkish 5 year CDS as of today trades higher than Greek CDS as risk to insure for a Turkish debt default rises above the probability for a Greek debt default.
Source: charts by Bloomberg