TURKEY: MNI EM Credit Team Estimate FVs for Turkey’s New USD Bonds

• EUR/USD: Dec09 $1.1585-90(E1.7bln), $1.1760(E1.3bln); Dec10 $1.1580-81(E1.7bln), $1.1800(E1.7bln); Dec11 $1.1595-00(E3.0bln), $1.1610(E3.4bln), $1.1800(E1.7bln)
• AUD/USD: Dec09 $0.6330-35(A$1.2bln); Dec11 $0.6550(A$1.6bln)
• USD/CNY: Dec10 Cny7.1088($1.2bln)

• RES 4: 113-29+ High Oct 17 and a key resistance
• RES 3: 113-23   High Oct 23
• RES 2: 113-07/22+ High Dec 3 / High Nov 25
• RES 1: 112-30   20-day EMA
• PRICE:‌‌ 112-12+ @ 11:09 GMT Dec 8
• SUP 1: 112-10+ Low Nov 20
• SUP 2: 112-07   Low Nov 5 and a key support
• SUP 3: 112-02+ Low Sep 25 
• SUP 4: 112-00   Round number support  

A bearish theme in Treasuries remains intact and today’s move down reinforces current bearish conditions. Price has recently traded through the 50-day EMA, at 112-26+. This undermines a recent bull theme and signals scope for a deeper retracement, with sights on 112-07, the Nov 5 high and a bear trigger. A reversal higher is required to once again refocus attention on the key resistance and bull trigger at 113-29+, the Oct 17 high.

The latest sell-side weeklies that we have read continue to outline a medium-term bearish view on Bunds:

• Goldman Sachs: We continue to think market sentiment is too pessimistic on Europe, with focus on risks from Chinese export competition, weak spot data and German fiscal under-delivery. But with forward-looking data signals pointing to improved domestic demand we expect cyclical improvement to exert stronger pressure on rates than structural headwinds. As a result, we continue to like core rates shorts in Europe, both in outright terms and cross market, against longs in Gilts.
• Natixis: International investor appetite is likely to remain strong given the diversification benefits still offered by the Bund curve. Moreover, despite a meaningful shift in Germany’s fiscal tone for the coming quarters, we remain of the view that Germany is still not on the path to becoming the borrower of last resort in the euro area, a structural feature that continues to cap the extent of term-premium rebuilding. For these reasons, we maintain our medium-term outlook for a gradual rise in Bund yields, with a 30bp increase in 10s by end-2026, targeting 3.10% in December 2026
• Societe Generale: Our outlook for 2026 sees higher yields for Bunds and steeper curves, extending the recent market trend. A rebuilding of term premia is supported by ECB QT at full speed, elevated net issuance from Germany and risks of a higher overall use of fiscal space. Technical factors like Dutch pension funds paying EUR swaps at the long end, contribute to our conviction of a steeper curve. We target the Bund to trade within a 2.50-3.00% range during 1H26, before breaking higher to around 3.25% by the end of 2026.