Turkey's risk premium returns to pre-pandemic levels

Turkey's 5-year credit risk premium (CDS) fell to 276 basis points, the lowest level since February 2020. Turkey's 5-year CDS fell to 276 basis points, the lowest level since February 2020. Analysts emphasized that with the continuing decline in Turkey's CDS, international credit rating agencies have also increased Turkey's credit rating and made positive changes to the credit rating outlook, indicating that investors' increasing confidence in the Turkish economy. International credit rating agency S&P raised Turkey's credit rating from "B" to "B+", while maintaining the credit rating outlook as "positive". Moody's, one of the other credit rating agencies, also raised Turkey's credit rating outlook from "stable" to "positive" in January. Fitch Ratings, on the other hand, raised Turkey's credit rating from "B" to "B+" in March, while changing the rating outlook from "stable" to "positive". In his speech at the Briefing on the Introduction of the "Inflation Report 2024-II", TCMB Governor Fatih Karahan made the following statements regarding the risk premium: “The current policy mix has enabled the risk perception towards Turkey to improve and the risk premium to decrease. The improvement in Turkey's risk premium has slowed down since the beginning of the year. Increased exchange rate volatility and deterioration in the reserve outlook weakened the risk perception in March. With the decisions we took in March, our tight monetary policy stance was reinforced, confidence in the policies we implemented increased and the reserve outlook improved. With these developments, the risk premium fell below the 300 basis point level again.”