2024 could be the year of Türkiye’s economic resurgence

Emerging markets could benefit from anticipated US interest rate cuts

The financial landscape of 2024 presents a mixed bag – a potentially bullish year for emerging markets with the US Federal Reserve contemplating three interest rate cuts, yet the potential for this being overshadowed by high volatility. In this milieu of uncertainties, one unexpected frontrunner takes center stage: Turkish bonds.

Despite the recent record underperformance of the Turkish currency against the dollar, the nation seems poised for a soft landing, hinting at a potential market recovery in the latter part of the year. 

While Türkiye’s inflationary struggles persist, the real action is unfolding in the country’s bond market, which offers a unique discount bonanza for discerning investors. There’s growing buzz about a bounce-back in this market in 2024.

Recent adjustments in Türkiye’s central bank monetary policy have spawned newfound interest in Turkish government bonds. Policy rates and local deposit rates have been adjusted to provide positive real rates compared to inflation expectations. The central bank has impressively raised the policy rate from 8.5% to 40%, reflecting a commitment to a sustained positive real-rate environment.

The Turkish lira continues to collapse: 10 years ago, One dollar would net you just over 2;
now, One dollar is worth over 28...