Bloomberg News

Nomura’s Buyukkayali Recommends Exiting Lira, Turkish Rates (3)

October 24, 2011

(Updates lira, bonds in third paragraph.)

Oct. 21 (Bloomberg) -- Nomura Holdings Inc.’s emerging markets strategist Olgay Buyukkayali recommended exiting trades on the Turkish lira, rates and credit default swaps because central bank policy and the crisis in Europe were making the trades “too complex.”

“Sometimes exiting is best,” Buyukkayali said in an e- mailed report. “We do not have any information to argue that the central bank is now orthodox from postmodern, we just know that the top of the band is higher where a low band has not been the problem anyway, clearly it is too complex for us and there is no point in losing some profit and loss. Our bias is to pay again in upcoming weeks, but we are flat all Turkey risk now.”

Two-year benchmark bond yields rose 29 basis points to 9.43 percent at 5 p.m. in Istanbul, posting the biggest two-day increase since October 2008. The lira gained 1.2 percent to 1.8352 per dollar.

Risk markets in Turkey “should become more volatile in the next three to four days with the approaching EU Summit,” the report said. “At the current backdrop, we prefer to have no position on currency, rates and credit default swaps in Turkey and have a bias to pay rates again despite fiscal policy moving in the right direction.”

Buyukkayali does not make actual trades and the investment bank is still active in Turkey, he said by e-mail today.

--Editors: Mark Bentley, Aydan Eksin

To contact the reporter on this story: Benjamin Harvey in Istanbul at bharvey11@bloomberg.net

To contact the editor responsible for this story: Mark Bentley at mbentley3@bloomberg.net


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