As of today we add a positive view on Turkish local debt to our list of high-conviction total return calls. The Central Bank has progressively tightened monetary policy since the start of this year. As a result, inflation expectations have at last started to decline and the lira has stabilized. But the currency remains relatively undervalued and yields are high, both vs the level of risk and vs comparable peers.
Monetary policy under the newly assertive CBRT has improved conditions for local debt and we see potential for yields to fall further over the next 3-6 months.
Trade closed on 11 September 2017 for a total return of 7.6%