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Weston NakamuraVisionary
Japan & US Global Macro Markets

🇹🇷CBRT HIKES +450bps to 15%

Turkey Central Bank under new leadership as of a week and a half ago follows through with a 450bp rate hike, top end of expectations.

Lira rallies on the headline +2.3%, after having already rallied 12% since last Mon following a tumultuous leadership change at both Turkey central bank head & finance minister (erdogan son in law), the former was fired after a year and a half of slashing rates from 25% to 8.25% then hiking rates once to 10%, and the latter resigned his post as fin min citing health concerns via Instagram (Seriously).. Erdogan makes an economic policy speech last Wed in a tone shift to seemingly allow for rate hikes, which previously referred to as “the devil.”

Foreign investors flooded into Turkey last week. The lira outpaced even BTC for much of the week, and is still keeping pace. Turkey 5yr CDS drops 200bps. BIST100 index has its best week since 2009. TUR- ishares Turkey ETF is up 23% since last mon.
However the real reason for a flow into Turkish assets was the authorities who loosened the limits on dollar swaps imposed by the recently departed fin min- a move that originally intended to prevent foreigners from shorting the lira in the ‘18 lira crisis, but ended up squeezing foreign capital out of Turkish assets instead. Now foreign flows are back.

Meanwhile CBRT continues to burn through FX reserves and continues to sell its gold holdings after becoming the worlds largest buyer of gold YTD (and... (More)

John Fadool
OSU Grad & Freelance Geopolitical Analyst

Geopolitics Today: Thursday Abbreviated Edition

Good Morning Everyone!

It's been an exceptionally slow news cycle today, so it will be a very shortened version of Geopolitics Today. I'm hoping to have more material for you tomorrow and might publish an afternoon edition today if more news crosses my feeds.

The Russians Return to Global Debt Markets: Forecast on Track

Today the Russian government tapped global debt markets for the first time this year by opening order books on two sovereign euro-denominated Eurobonds to secure additional funding. Moscow has said that the reason it's seeking international funding is the fall in traditional revenue sources such as oil, gas, nickel, and other commodities, with plans to increase its public debt to nearly 19% of GDP this year.

Bids for Russian Eurobond offer exceeded 2.7 billion euros ($3.2 billion), with the bulk of the interest coming from Russian investors likely coming from the large private and state-owned enterprises who already operate with and hold massive reserves of Euros.

The two bond offering are as follows:

  • 7-Year Eurobond with a yield of 1.25%
  • 12-Year Eurobond with a yield of 1.85%

On the political end, the reason why the Kremlin is offering bonds now and not next years is the fear that a President-elect Biden will implement new sanctions on Russian state banks, limiting its access to foreign markets for its bond offerings. Additionally, while most Russian debt offerings have been taken up from domestic institutions in recent history, it's a reminder to global debt markets that Russia still exists... (More)

John Fadool
OSU Grad & Freelance Geopolitical Analyst

Geopolitics Today: Wednesday Issue

Good Morning Everyone!

It has been a busy day in the world of Geopolitics, so that this issue will be considerably longer than yesterdays. Additionally, my friend and business partner @Jeremiah S and I produced part II in our "Markets and Politics" series where we discuss the coming chaos in the US Presidential transition, implications of a split Legislature on stimulus, the future of the 2017 tax reform, the impacts of a Biden foreign policy on international markets, and much more. If you're interested in hearing our thoughts, I'll be linking the video below. Have a good day, everyone!

Markets and Politics with Jeremiah & John: Part Deux

Turkey to Overhaul its Economic Strategy: The Erdogan Pivot

After the rally in the Lira over Monday and Tuesday, Turkish president Erdogan unveiled his new economic agenda that focuses on the three pillars of price, financial, and macroeconomic stability. During the announcement, he promised that he was in the process of setting up meetings with international investors and financial institutions to encourage increased returns and reduced risk for doing business in Turkey.

With this press conference, we start getting the full picture of what transpired over the past five days concerning all the reshuffling in the Erdogan cabinet and the central bank. When Central Bank Governor Murat Uysal was dismissed Friday night, it was likely to see what the reaction from markets will be after given time to digest the news over the weekend. The positive reaction in the Lira's visible appreciation... (More)

John Fadool
OSU Grad & Freelance Geopolitical Analyst

Geopolitics Today: Tuesday Issue

Good Afternoon Everyone!

Today has been a rather uneventful news cycle for Geopolitics, which seems to be a Tuesday trend. Regardless hopefully, you enjoy today's shortened edition of Geopolitics Today. Looking forward to the comments!

The War Between Armenia & Azerbaijan Ends: Russian Peacekeepers Deployed

Last night the leaders of Azerbaijan and Armenia signed a Russian brokered peace agreement that would see land transfers of areas taken by the Azeris during the conflict retained by the Azeri Government and Russian peacekeepers deployed along the line of control.

The Russian military will be deploying nearly 2,000 peacekeepers, 90 armored personnel carriers, and 3800 vehicles and pieces of special equipment along the Lachin corridor. It's been broadly hinted at by Russian officials that even though Armenia is part of the CSTO (Russian answer to NATO) that any Russian military intervention would be contingent on Armenia being aggressed upon by another nation. The Russian said that this conflict didn't meet that standard. This broadly indicates that the Armenians started the conflict despite knowing that they were not only outnumbered but grossly outgunned with the expectation that Russian intervention would see them take large swaths of Azeri territory.

To no one's surprise, the Russians, despite having military bases in Armenian territory, buttoned up and declared their neutrality, leaving the Armenians to defend themselves against a much superior foe. The Armenian managed to hold out for just over a month with most of the gains made by Azeri military forces being made over the past... (More)