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  • Emerging Markets Debt Daily

    Turkey Central Bank – Neither Here Nor There

    Natalia Gurushina, Chief Economist, Emerging Markets Fixed Income Strategy
    August 20, 2020

    Today’s rate-setting meeting of the Turkish central bank (CBRT) produced no miracles. The benchmark rate was kept on hold at 8.25%, and the only thing the CBRT dared to change was to raise the reserve requirements on FX deposits. The average cost of funding barely moved this morning, and there was nothing to support the currency during today’s global risk-off episode. The CBRT’s promise to maintain “cautious” policy stance generated a bunch of sarcastic comments – ranging from “job security” to a need to take into account certain political pressures.

    China’s central bank (PBoC) sent a clear message that it is not in the mood for more blanket easing. The PBoC kept 1-year and 5-year Loan Prime Rates on hold, and it looks like the emphasis will be on policy fine-tuning and targeted/”drip” measures from now on. August’s Emerging Industries PMI (EPMI) – which is closely correlated with China’s official activity gauge – will be released any day now. It should provide more color on the pace of rebound and potential recipients of the “drip” stimulus. 

    The Brazilian senate’s decision to overturn President Jair Bolsonaro’s veto on public servants’ wage increases was unexpected and disappointing. Brazil’s fiscal deficit is expected to balloon to 16% of GDP (or so) this year – one of the worst among major EM. And the senate’s move can make it even more difficult to keep the deficit in check. The decision follows the President’s conflicting messages about the Spending Cap rule, which adds to overall confusion about Brazil’s fiscal outlook

    À propos: Here is some food for thought. My daughter conducted a summer experiment for her biology class. She planted some radishes, adding varying amounts of sugar to the water. The group with zero added sugar was the only group that had a 100% survival rate (see picture below). We are having sugar-free September.


    Source: Natalia Gurushina


    PMI – Purchasing Managers’ Index: economic indicators derived from monthly surveys of private sector companies; ISM – Institute for Supply Management PMI: ISM releases an index based on more than 400 purchasing and supply managers surveys; both in the manufacturing and non-manufacturing industries; CPI – Consumer Price Index: an index of the variation in prices paid by typical consumers for retail goods and other items; PPI – Producer Price Index: a family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time; PCE inflation – Personal Consumption Expenditures Price Index: one measure of U.S. inflation, tracking the change in prices of goods and services purchased by consumers throughout the economy; MSCI – Morgan Stanley Capital International: an American provider of equity, fixed income, hedge fund stock market indexes, and equity portfolio analysis tools; VIX – CBOE Volatility Index: an index created by the Chicago Board Options Exchange (CBOE), which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities on S&P 500 index options.; GBI-EM – JP Morgan’s Government Bond Index – Emerging Markets: comprehensive emerging market debt benchmarks that track local currency bonds issued by Emerging market governments.; EMBI – JP Morgan’s Emerging Market Bond Index: JP Morgan's index of dollar-denominated sovereign bonds issued by a selection of emerging market countries; EMBIG - JP Morgan’s Emerging Market Bond Index Global: tracks total returns for traded external debt instruments in emerging markets.

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