TURKEY: Markets Roiled by Arrest of Opposition Leader, TRY Drops as Much as 10%
USDTRY has rallied significantly at the start of Wednesday’s session, up around 6% at typing though gains had previously eclipsed 10%, which placed the pair above the 41.00 handle. Istanbul mayor Ekrem Imamoglu was taken into custody early Wednesday morning at his home, triggering the sell-off across Turkish assets. Alongside the drop in the lira, the benchmark Borsa Istanbul 100 Index fell 6.9% at the open, triggering a trading suspension under the circuit-breaker rules. Losses currently stand at around 5.5%. Note that the uptick rule has been applied for short sales on the top 50 stocks.
• Police detained Imamoglu on alleged corruption charges in a move denounced by CHP leader Ozgur Ozel as "a coup attempt against our next president". Media reports also spoke of a second probe into allegedly aiding the banned Kurdistan Workers' Party (PKK).
• Note that Turkish authorities revoked Imamoglu’s university diploma yesterday - a mandatory requirement for the office of presidency. That marked the latest of a slew of investigations and lawsuits into the mayor – one of which threatens a 7-year prison sentence.
• Turkey is scheduled to vote for its next president in 2028, where there is growing speculation that Erdogan is preparing to stand for a new mandate. Imamoglu is expected to become the opposition’s presidential challenger this month at a meeting of his Republican People’s Party (CHP) on March 23.
• The sell-off across Turkish assets may have been a catalyst for that broader risk-off move across global markets. Gauges of EM stocks and currencies have slid today, with those moves unwinding in tandem with the partial recovery in the lira off its lows. Bloomberg flag BBVA as one name to watch this morning thanks to its exposure to Turkey via its investment bank. It opened 2.8% lower.
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CROSS ASSET: The Dollar finds a broader bid
- The Dollar finds a broader bid, price action is mostly Germany Long end led, 10yr and 30yr, although similar drag lower are witnessed in shorter End STIR contracts.
- The push in Tnotes (higher Yield) sees the Dollar testing intraday highs against the INR, MXN, KRW, CNY, CZK, EUR, PLN, ZAR, CAD, while JPY, CNH, AUD and NZD are seeing some offers.
- Bund is so far finding some support right on the 2.50% Yield level, 2.499% is the printed high.
SWITZERLAND DATA: Q4 GDP Outperforms Consensus Expectations
Swiss sport-event and seasonally-adjusted real GDP growth was +0.4% in Q4 2024, according to the flash estimate from local statistics office BFS. This compares to a consensus estimate of +0.3%, and represents a pickup from Q3's rate of +0.2%.
- This brings in 2024 growth at 0.8% in 2024 overall, after 1.2% 2023. "This is well below Switzerland's average economic growth (1.8% since 1981), reflecting the subdued performance of major trading partners. The industrial sector recorded moderate growth overall, supported primarily by the chemical and pharmaceutical industry. The services sector grew at a below-average rate by historical standards."
- For 2025, MNI's sellside consensus sees Swiss growth at +1.3% Y/Y, but the estimate was downwardly revised by 0.15pp during the last three months.
STIR: SONIAs Lightly Outperform Euribor, 53bps of BOE Easing Priced Through '25
SONIA futures lightly outperform Euribor counterparts, but are nonetheless pressured by this morning’s core FI pullback. Futures are -0.5 to -5.0 ticks through the blues at typing, with Z6 piercing last Thursday’s low of 96.105.
- Fallout from weekend speculation around a US-brokered peace deal between Russia and Ukraine appears to be factoring into the selloff in core EGBs.
- BoE-dated OIS price 54bps of easing, up to 2.5bps more hawkish than Friday’s close. The next full 25bp cut is priced through the June gathering (29bps of easing priced).
- Over the weekend, the FT reported that the OBR’s assumptions around UK productivity growth may be too optimistic, which could force the Chancellor into more fiscal tightening in the coming years. However, the report offers no concrete details on potential policy changes.
- The Government is also assessing the case for tariffs on some US products if President Trump’s 25% aluminium and steel levies are implemented next month.
- This week’s UK calendar is headlined by the January inflation and December/January labour market reports, with the February flash PMIs also due on Friday.
- It is debatable whether inflation or PMI data are the primary focus right now (official labour market data seems to have fallen behind these in the pecking order but still has potential to cause large market moves on surprises).
- MNI’s full inflation/labour market preview will be released later today.
| Meeting Date | SONIA BoE-Dated OIS (%) | Difference Vs. Current Effective SONIA Rate (bp) |
| Mar-25 | 4.434 | -2.1 |
| May-25 | 4.243 | -21.2 |
| Jun-25 | 4.166 | -28.8 |
| Aug-25 | 4.020 | -43.4 |
| Sep-25 | 3.992 | -46.2 |
| Nov-25 | 3.928 | -52.7 |
| Dec-25 | 3.917 | -53.7 |
| Feb-26 | 3.892 | -56.2 |
| Source: MNI/Bloomberg |
