First reaction to the ‘election’ results in the market: Credit risk premium rose sharply! How much was the dollar and the euro? (May 15, 2023)

It is curious how the markets will follow after the historical election. Turkey’s credit risk premium (CDS), which fell below 500 points last week, increased sharply to 600 this morning and reached the peak of six months.

While the Dollar/TL was at 19.58 TL in the first transactions in the international markets when the Turkish markets were not open, then it was traded in the 19.38-19.64 band. As of 09.26, the exchange rate was at 19.6402 with an increase of 0.38 percent.

If it is Euro/TL, the lowest is 21.21; while seeing the highest level of 21.57; Currently, it is at 21.3470 with a 0.64 percent gain in value.

A bank’s foreign exchange desk processor, “We are talking about a public-controlled structure on the currency side, so we will monitor how corporate and individual demand will be handled separately. It is a question mark how the foreign exchange demand will be managed”said.

The most critical question for the markets is how the new government will change the current policies, especially the economy. The increasing views that the dollar/TL is priced lower than it should have been before the elections and that the TL should depreciate increases the interest in foreign currency.

While the uncertain results in the presidential elections showed that Tayyip Erdoğan was ahead and the elections were most likely in the second round, the bankers pointed out that fluctuations in the markets were inevitable during this process and that the TL could also be at risk.


While the bankers stated that the first reaction to the election results could be observed in the CDS (credit default swap showing the credit risk premium) market, which is not publicly controlled, the 5-year CDS increased by 105 basis points compared to the pre-election period, showing that Turkey’s risk premium increased.

Turkey’s 5-year CDS’s rose sharply after the presidential elections, which seemed to have reached the second round, and climbed to the peak of six months.

The CDS, which shows the cost of insuring Turkey’s 5-year debt against bankruptcy, rose 105 basis points to 597 basis points compared to Friday. S&P Global Market Intelligence stated that this was the highest level recorded since November 2022.

In the last week before the election, there was a sharp rise in the stock market and a decrease in CDS, with the expectation that Ince’s withdrawal from the candidacy would result in favor of the opposition candidate in the first round. Analysts expect drastic movements today and in the two weeks that will pass until the second round, especially in these markets that are not under public control.


Strategic Advisory Services co-founder Hakan Akbaş said, “The next two weeks will be the longest two weeks in Turkish history and many things will happen. I expect a significant decrease in Borsa Istanbul and a lot of fluctuation in TL. Both sides will continue to claim to win in this process, but Erdogan will be advantageous in the second round. Still, a lot can happen in the next two weeks.”


In a note sent last night by risk research firm Teneo, “The People’s Alliance seems to have won a majority in parliament. This result will be an important advantage for Erdogan in the second round. Looking at the developments today, it is very difficult to talk about a positive result for the markets.”it was said.

While it is expected that it will take time for Turkey to recover from the damage left by the applied economic policies, where record inflation levels have been observed in the last two years and the TL has depreciated by approximately 60 percent, 2023 seems likely to be a lost year.

Everyone agrees that orthodox views will be adopted instead of current policies if the Nation Alliance, which represents the opposition, wins the elections. It is not clear in terms of the markets which policies will come to the fore in the People’s Alliance. All disclosures in this context will be closely monitored.

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