Thread by @TFL1728

@zerohedge does not understand what's going on in Turkey. The last thing Turkey wants is foreign capital returning.

Offering a 4% two year bond is just a stop-gap for those that paying higher rates than that, to offset some cap. outflow.

1/

zerohedge.com/markets/after-…

I've explained this before. Erdogan is de-dollarizing. And he Keynesian assumption of a linear response of inflation to interest rates is a very poor one. 2/

tomluongo.me/2021/12/23/is-…

Now, let's turn to the issue of the day. Russia's gas for rubles trade it is forcing on the world. Gazprombank builds up euros/dollars/etc. foists the FX costs off on the buyer. Ruble demand rises. 3/

Gazprombank has no interest in holding USD/EUR/GBP so they set up a swap with Turkey to pass them through and stabilize FX reserves at 4%
/4

Those Lira can then be offset, hedged, a carry created, etc. With all of them in a bear market dynamic vs. the RUB, Russia is now going to double dip on the returns as the TRY stabilizes.

Those USD/EUR/GBP will pay for Turkey's stabilization. 5/

Using depreciating EUR to buy oil/gas to sell to Turkey at 4% which accelerates the payoff rate of foreign currency debt in Turkey, which feeds the doom loop of FX weakness vs. Russian exports to 'unfriendly' countries. 6/