China.....
Mish.....
Tough Luck?
Yesterday morning, the South China Morning Post commented It's tough, but China must let trust company products fail.
Read more at http://globaleconomicanalysis.blogspot.com/2014/01/credit-equals-gold-no1.html#6exy0uX1e0jy6r8y.99Failed Trusts
Did you catch the error in the headline "China must let trust products fail"?
It's not a question of "letting the trust fail". The trust did fail. The assets backing the trust failed. The question at hand is not failure of the trust, but whether or not losses would be recognized.
Without a bailout investors would have taken huge losses, and most likely totally wiped out.
Moral Hazard Bailout in Progress
Later yesterday a decision to do the wrong thing was made. Where the money came from is uncertain, but the bottom line isn't ICBC Offers Clients Option to Recoup Funds From Trust.
Bailouts and guarantees (implicit or explicit), coupled with loose money and manipulated interest rates are what causes these credit bubbles in the first place.
Bailouts do nothing but encourage more of the same moral hazard investment behavior, all but ensuring still bigger bailouts down the road.
There is an enormous credit bubble in China, guaranteed to come crashing down.
Mystery Money
The Financial Times reports China trust deal raises thorny questions.
Shen Jianguang, an analyst with Mizuho Securities commented "This will help regulators push through these rules. It teaches everyone a lesson about the expansion of shadow banking"
Shen is completely wrong.
It's not the lack of regulations that caused this mess. It is central bank manipulation of money and interest rates that fostered shadow banking schemes.
Indeed there is little difference between the credit bubble in China, and the housing and credit bubbles in the US that blew sky high in 2008 and 2009.
Shen Jianguang seriously needs a Bubblicious Refresher Course: What Causes Economic Bubbles? When Do Bubbles Burst? Can the Fed Prevent Bubbles?
Credit is Never Gold
The Financial Times noted that investors were not happy to get their money back. "This is a war of attrition. We have gained the biggest mountain and now we must attack and seize the smaller hills," says one Shanghai-based investor who declined to give his name.
Good grief.
Investors in a coal mine that does not even exist (and won't due to plunging price of coal) ought to lose everything.
Credit implies risk. There is no such thing as a 10% risk-free investment. The higher the promise, the greater the risk.
Don't Want Credit Risk?
Looking for something with no credit risk? Then buy physical gold and hold it.
There is a risk of decline in the purchasing power of gold as the plunge from over $1900 an ounce to under $1200 an ounce shows, but there is no risk of default.
Start of a Global Currency Crisis?
With every passing day, odds of global currency crisis increase. Emerging markets, Latin America, Japan, Europe, and China are all in the mix.
For further discussion, please see Start of a Global Currency Crisis?
Looking for something that's not in the mix? Buy gold.
Mike "Mish" Shedlock
Mish.....
Tuesday, January 28, 2014 1:55 PM
Credit Equals Gold No.1
Interesting details have emerged regarding the Chinese trust fund that was on the verge of default a few days ago. In fitting irony, the name of the fund is Credit Equals Gold No.1.
On January 15, Reuters reported China's ICBC says won't compensate investors in troubled shadow bank product.
On January 15, Reuters reported China's ICBC says won't compensate investors in troubled shadow bank product.
"Industrial and Commercial Bank of China, the world's largest bank by assets, said on Thursday that it has no plans to use its own money to repay investors in a troubled off-balance-sheet investment product that it helped to market."Investors should have taken a hit. Certainly the promised 10% yield was too good to be true. Heck, the name of the product itself was a likely indication of trouble.
Tough Luck?
Yesterday morning, the South China Morning Post commented It's tough, but China must let trust company products fail.
The 700 investors in China's "Credit Equals Gold No1 Trust" are hoping that Industrial and Commercial Bank of China will bail them out.
Unfortunately, what would be good for individual investors would be very bad for China's financial system as a whole. It's harsh, but the troubled 3 billion yuan (HK$3.85 billion) investment scheme should be allowed to fail.
Come the end of the month, the Credit Equals Gold1 product was supposed to mature, returning investors their capital plus a 10 per cent yield.
That's not now going to happen. China Credit Trust, which structured the product, has warned it will have difficulty making its payout.
Meanwhile, the coal miner whose loans underpinned the scheme has ceased production after its vice-chairman was arrested for taking deposits without a banking license.
Read more at http://globaleconomicanalysis.blogspot.com/2014/01/credit-equals-gold-no1.html#6exy0uX1e0jy6r8y.99Failed Trusts
Did you catch the error in the headline "China must let trust products fail"?
It's not a question of "letting the trust fail". The trust did fail. The assets backing the trust failed. The question at hand is not failure of the trust, but whether or not losses would be recognized.
Without a bailout investors would have taken huge losses, and most likely totally wiped out.
Moral Hazard Bailout in Progress
Later yesterday a decision to do the wrong thing was made. Where the money came from is uncertain, but the bottom line isn't ICBC Offers Clients Option to Recoup Funds From Trust.
Industrial & Commercial Bank of China Ltd. said investors in a troubled high-yield trust can recoup their funds, averting a threatened default that underscored concern over the shadow-banking system and helped spur a selloff in emerging-market currencies and stocks.Getting it Wrong
Rights in the 3 billion-yuan ($496 million) product issued by China Credit Trust Co. can be sold to unidentified buyers at a price equal to the value of the principal invested, according to one investor who cited an offer presented by ICBC and asked to be identified only by his surname Chen. China Credit Trust earlier said it reached an agreement for a potential investment and asked clients of ICBC, China’s biggest bank, to contact their financial advisers.
“A default was bound to lead to systemic risks that China is unable to cope with, so in that sense a bailout is a positive step to stabilize the market,” said Xu Gao, the Beijing-based chief economist at Everbright Securities Co. Still, implicit guarantees distort the market and “delaying the first default means risks are snowballing,” he said.Bubblicious Questions
Bailouts and guarantees (implicit or explicit), coupled with loose money and manipulated interest rates are what causes these credit bubbles in the first place.
Bailouts do nothing but encourage more of the same moral hazard investment behavior, all but ensuring still bigger bailouts down the road.
There is an enormous credit bubble in China, guaranteed to come crashing down.
Mystery Money
The Financial Times reports China trust deal raises thorny questions.
For global markets, the troubled product became emblematic of the risks that have built up in China’s growing shadow banking sector. Non-bank institutions such as trusts now play a crucial role in providing funds to companies deemed too risky by regulators to borrow from the country’s banks. Financing outside the formal banking system accounted for more than a third of the Rmb17tn total new credit issued in 2013.Bubblicious Refresher Course
With roughly Rmb4tn ($661bn) in trusts maturing this year amid tight monetary conditions, many expect more repayment problems. “The market already perceives a higher risk and is in the process of pricing higher risk,” says Wang Tao, an economist with UBS.
In the case of Credit Equals Gold No. 1, ICBC clients invested a total of Rmb3bn in a product sold by China Credit Trust, one of the country’s biggest “shadow banks”. The product, a mere sliver of China’s $1.2tn trust market, was underpinned entirely by loans to and equity in coal miner Shanxi Zhenfu Energy Group. It was a rotten investment: the price of coal plummeted and Zhenfu collapsed under the weight of heavy debts.
Nevertheless, on Monday, four days before the product matured, ICBC told investors a deal had been reached that would allow them to recoup their full principal, although they would miss out on about a quarter of the interest they had expected to earn.
There was little detail about where the money came from, but Chinese media have reported in recent days that a bailout was likely to involve ICBC, China Credit and the local government.
The last-minute rescue raises a thorny question for the future of the Chinese economy. Has the deal confirmed the widespread belief that the government will do whatever it can to stave off trouble, hence fuelling more risk-taking? Or has the near-default taught investors that high yields come with high risks?
Shen Jianguang, an analyst with Mizuho Securities commented "This will help regulators push through these rules. It teaches everyone a lesson about the expansion of shadow banking"
Shen is completely wrong.
It's not the lack of regulations that caused this mess. It is central bank manipulation of money and interest rates that fostered shadow banking schemes.
Indeed there is little difference between the credit bubble in China, and the housing and credit bubbles in the US that blew sky high in 2008 and 2009.
Shen Jianguang seriously needs a Bubblicious Refresher Course: What Causes Economic Bubbles? When Do Bubbles Burst? Can the Fed Prevent Bubbles?
Credit is Never Gold
The Financial Times noted that investors were not happy to get their money back. "This is a war of attrition. We have gained the biggest mountain and now we must attack and seize the smaller hills," says one Shanghai-based investor who declined to give his name.
Good grief.
Investors in a coal mine that does not even exist (and won't due to plunging price of coal) ought to lose everything.
Credit implies risk. There is no such thing as a 10% risk-free investment. The higher the promise, the greater the risk.
Don't Want Credit Risk?
Looking for something with no credit risk? Then buy physical gold and hold it.
There is a risk of decline in the purchasing power of gold as the plunge from over $1900 an ounce to under $1200 an ounce shows, but there is no risk of default.
Start of a Global Currency Crisis?
With every passing day, odds of global currency crisis increase. Emerging markets, Latin America, Japan, Europe, and China are all in the mix.
For further discussion, please see Start of a Global Currency Crisis?
Looking for something that's not in the mix? Buy gold.
Mike "Mish" Shedlock
http://www.scmp.com/business/banking-finance/article/1415301/some-investors-agree-restructure-china-credit-trust-product
Submitted by Tyler Durden on 01/28/2014 17:06 -0500
Submitted by Tyler Durden on 01/28/2014 17:49 -0500
Submitted by Tyler Durden on 01/28/2014 18:09 -0500
The bank raised its overnight lending rate to 12 percent from 7.75 percent, its one-week repo rate to 10 percent from 4.5, and its overnight borrowing rate to 8 percent from 3.5, much sharper moves than economists had forecast.
The lira strengthened to 2.18 against the dollar after the decision from 2.25 late on Tuesday, having hit a record low of 2.3900 early on Monday.
Erdoğan, keen to maintain economic growth ahead of an election cycle starting in two months, has been a vociferous opponent of higher borrowing costs, railing against what he describes as an "interest rate lobby" of speculators seeking to stifle growth and undermine the economy.
"I would like you to know that as always, I am against a hike in interest rates today," Erdoğan told reporters late on Tuesday, hours before the bank's emergency meeting, adding:
"But of course I don't have the authority to interfere with the central bank ... the responsibility belongs to them."
The central bank had been struggling to contain the lira's precipitous slide, with investor confidence damaged by a corruption scandal shaking the government and the global impact of a cut in US monetary stimulus.
Reluctant until now to make an outright rate hike, the central bank has instead tried to defend the currency by burning through forex reserves and trying to squeeze up borrowing costs on the margins - a battle it had clearly been losing and one which it has now decisively abandoned.
In a statement, the bank said it would maintain tight monetary policy until the inflation outlook showed a clear improvement.
The bank raised its overnight lending rate to 12 percent from 7.75 percent, its one-week repo rate to 10 percent from 4.5, and its overnight borrowing rate to 8 percent from 3.5, much sharper moves than economists had forecast.
The lira strengthened to 2.18 against the dollar after the decision from 2.25 late on Tuesday, having hit a record low of 2.3900 early on Monday.
Erdoğan, keen to maintain economic growth ahead of an election cycle starting in two months, has been a vociferous opponent of higher borrowing costs, railing against what he describes as an "interest rate lobby" of speculators seeking to stifle growth and undermine the economy.
"I would like you to know that as always, I am against a hike in interest rates today," Erdoğan told reporters late on Tuesday, hours before the bank's emergency meeting, adding:
"But of course I don't have the authority to interfere with the central bank ... the responsibility belongs to them."
The central bank had been struggling to contain the lira's precipitous slide, with investor confidence damaged by a corruption scandal shaking the government and the global impact of a cut in US monetary stimulus.
Reluctant until now to make an outright rate hike, the central bank has instead tried to defend the currency by burning through forex reserves and trying to squeeze up borrowing costs on the margins - a battle it had clearly been losing and one which it has now decisively abandoned.
In a statement, the bank said it would maintain tight monetary policy until the inflation outlook showed a clear improvement.
Some investors agree to restructure China Credit Trust product
China Credit Trust says some investors who bought into 3b yuan product have agreed to a debt restructuring, but payment arrangements unclear
PUBLISHED : Tuesday, 28 January, 2014, 1:35am
UPDATED : Tuesday, 28 January, 2014, 1:35am
Some investors agree to restructure China Credit Trust product
China Credit Trust has reached an agreement to restructure a three billion yuan high-yield product to avoid the first default in the mainland's 10 trillion yuan (HK$12.7 trillion) trust industry.
The trust company said yesterday that some investors had agreed to restructure the product. It asked those who had bought trust units to contact their wealth managers at Industrial and Commercial Bank of China, the trust distributor, to arrange for payment.
The statement, released four days before payment was due, did not identify the source of funds, or say whether investors would get their money back.
The three-year product, Credit Equals Gold No1, promised an annual return of about 10 per cent and was bought by 700 high-net-worth investors who were customers of ICBC. It raised money for a Shanxi coal miner that collapsed after its owner was arrested for illegal fundraising. Three companies have been chosen by the trust company, ICBC and Shanxi's provincial government to take over the rights in the coal mine linked to the trust product, the Caixin Media news portal quoted unidentified sources as saying on Sunday.
An investor told the South China Morning Post that ICBC had told him that he could sell his trust rights to unidentified buyers at a price equal to the value of the principal invested. "If I sign the agreement, I will get my three million yuan principal back by January 31 when the product matures," said the investor. The wealth manager accompanied me out after [the] talk. I'm undecided about whether to let the 250,000 to 260,000 yuan of interest go or keep negotiating with ICBC for compensation."
Fan Wei, chief analyst at Hongyuan Securities, said the solution would break the "rigid payment" tradition if investors did not receive the promised interest.
"The debt restructuring would set an example for future payments when many trust products mature this year," Fan said.
Many analysts had expected the product would be allowed to default to underscore policymakers' determination to sever the implicit guarantee of such products by financial institutions.
However, the trust company, ICBC and the Shanxi government held talks to avoid a product failure that would have damaged the reputation of the financial institutions and risked sparking social unrest in the province, a trust industry insider said. "It shows Chinese regulators are not ready to completely break rigid repayment," the source said. "The solution would be detrimental to investors' risk awareness."
The Guangzhou-based Time Weekly newspaper reported last week that China Credit Trust, ICBC and the Shanxi government were considering teaming up to bail out investors. ICBC and the provincial government later denied the report.
A bailout of the trust product would leave mainland authorities with a growing problem of moral hazard, Standard & Poor's said in a research note last week. An opportunity for "instilling market discipline" would have been missed, it said.
The trust market represented the biggest default risk in the mainland's shadow banking system, analysts at Bank of America Merrill Lynch said in research report.
http://www.bloomberg.com/news/2014-01-27/china-s-rich-know-bailouts-equal-gold-no-1.html
One of the nice things for wealthy people in China is that mysterious, unidentified third parties occasionally swoop in at the last minute to bail them out of investments that are about to default. And they do such generous things for the good of the country and its financial system, of course.
China's rich are fortunate to have this backstop, too. Just last week the chairman of Industrial & Commercial Bank of China Ltd. was saying the lender wouldn't compensate investors in the 3 billion-yuan ($496 million) Credit Equals Gold No. 1 high-yield trust product that it distributed. "I believe this incident has been a very good opportunity to educate the investors, to educate the trust companies and to educate ICBC," Jiang Jianqing told CNBC while at the World Economic Forum in Davos, Switzerland. In the future, he said, if customers buy "wealth management products or other products they must see clearly the risks."
Teaching them a lesson may have to wait, though, because now it looks like the fund's investors will get some sort of payout, although it isn't clear who will do the paying or how much the payout will be. But minor details like those don't seem to be important right now, because what matters to the Chinese government is preventing the global capital markets from having a panic attack about the country's shadow-banking system.
The trust product, issued in 2011 by China Credit Trust Co. to raise money for a coal company that later collapsed after its owner was arrested, has a payment due Jan. 31. And markets have been getting nervous that a default might trigger a run on similar products. So the expedient thing to do is encourage even more moral hazard and find a way to bail out the fund's investors.
The downside is the part about moral hazard -- that is, encouraging investors to do silly things like plunk money into black holes with implicit guarantees in exchange for annual returns ranging from 9.5 percent to 11 percent. But governments in a crisis, whether in the U.S. or China, tend not to get too worried about stuff like that because they just want to get through the moment. ICBC's vaunted leaders can figure some artful way to explain the flip-flop later, maybe at the next World Economic Forum, where vaporous observations about the state of the world often are more wishful thinking than reality.
Bloomberg News today reported that ICBC said investments in the trust product can be sold to buyers at a price equal to the value of the principal invested, citing an investor who was familiar with an offer by ICBC. Investors looking to sell would have to authorize China Credit Trust to handle the transaction. And isn't that convenient, because the mystery buyer or buyers wouldn't stay a secret for long if just anybody could go directly to the source to get their money back.
For a country run by the Communist Party, China seems to have mastered bailout capitalism pretty quickly.
Turkey......
Submitted by Tyler Durden on 01/29/2014 06:58 -0500
Turkey Central Bank Intervention Halflife 12 Hours As USDTRY Roundtrips
So much for the credibility of the CBRT? After the Lira soared, and the USDTRY plummeted by just under 1000 pips yesterday when the Turkish Central Bank announced its "shock and awe" intervention, it has since pared back virtually all gains, and at last check was just over 2.24 having nearly roundtripped in 12 hours. Why the loss faith? Two reasons: First, aswe pointed out yesterday, suddenly the domestic situation in Turkey takes front stage again, with 4.25% added elements of instability, causing the political instability to soar, leading to an even higher probability of a social and political overhaul. Second, as Goldman pointed out overnight, "the CBRT stated that liquidity "… will be provided primarily from one-week repo rate instead of the marginal funding rate in the forthcoming period". This implies that the effective rate hike is 225bp (to 10.00%; the 1-week repo rate), as the Non-PD lending rate was 7.75% prior to the announcement."
In other words, when looked at on a corridor basis, the CBRT hiked not by a shocking and awing 425 bps but by precisely the predicted 225 bps! Which means the central bankers merely went along consensus, and not a basis point above it, which is the worst of all worlds - giving the impression of massive tightening (for domestic political purposes), while in reality not doing all that much.
The end result, well - see for yourselves:
UH-OH: That Huge Turkish Lira Move Is Rapidly Melting Away
Watch out folks. Things are getting interesting.
Yesterday evening, the Turkish Lira SOARED after a massive rate hike by Turkey's central bank.
The move helped created a bout of risk on sentiment across the market.
But look what's happening now. The Turkish Lira — inspire of the huge rate hike — is rapidly melting against, giving up all those gains.
Here's a 12 hour chart of the US dollar against the Turkish Lira. As you can see, the dollar tanked right away yesterday evening against the Lira. But now it's climbing back as traders fade the Lira strength.
Keep an eye on this.
Meanwhile, the original strengthening of the Turkish Lira yesterday evening prompted a huge bout of global risk taking, as investors took the move as a sign of a major emerging market doing what needed to be done to end its currency problems.
But as the Lira is weakening again, the air is coming out of global stock markets a bit now too and the gains are significantly less subdued.
Remember, there is a Fed decision this afternoon. Today will be interesting.
http://www.zerohedge.com/news/2014-01-28/shock-and-awe-turkey-which-hikes-overnight-rate-425-12-blows-away-expectations
Shock And Awe From Turkey Which Hikes Overnight Rate By 4.25% To 12%, Blows Away Expectations
The much anticipated Turkey Central Bank Decision is out and it is a stunner:
- TURKEY'S CENTRAL BANK RAISES OVERNIGHT LENDING RATE TO 12.00%- this is the key rate, and it was at 7.75% until now, so an epic 4.25% increase, far greater than the 2.50% expected.
- TURKEY'S CENTRAL BANK RAISES BENCHMARK REPO RATE TO 10.00% - from 4.50%
- TURKEY'S CENTRAL BANK RAISES OVERNIGHT BORROWING RATE TO 8.00% from 3.50%
- TURKEY CENTRAL BANK SETS PRIMARY DEALER RATE AT 11.5% VS 6.75%
- TURKEY CENTRAL BANK RAISES LATE LIQUIDITY WINDOW RATE TO 15%
The full release from the TCMB:
The Monetary Policy Committee (the Committee) has decided to adjust the short term interest rates as follows:a) Overnight Interest Rates: Marginal Funding Rate is increased from 7.75 percent to 12 percent, borrowing rate from 3.5 percent to 8 percent, and the interest rate on borrowing facilities provided for primary dealers via repo transactions from 6.75 to 11.5 percent.b) One-week repo rate is increased from 4.5 percent to 10 percent.c) Late Liquidity Window Interest Rates (between 4:00 p.m. – 5:00 p.m.): Borrowing rate is kept at 0 percent, lending rate is increased from 10.25 percent to 15 percent.Recent domestic and external developments are having an adverse impact on risk perceptions, leading to a significant depreciation in the Turkish lira and a pronounced increase in the risk premium. The Central Bank will implement necessary measures at its disposal to contain the negative impact of these developments on inflation and macroeconomic stability. In this respect, the Committee decided to implement a strong monetary tightening and to simplify the operational framework. Accordingly, (i) one-week repo rate is increased from 4.5 percent to 10 percent; (ii) the Central Bank liquidity will be provided primarily from one-week repo rate instead of the marginal funding rate in the forthcoming period.Tight monetary policy stance will be sustained until there is a significant improvement in the inflation outlook. Under this policy stance, inflation is expected to reach the 5 percent target by mid-2015.It should be emphasized that any new data or information may lead the Committee to revise its stance.The summary of the Monetary Policy Committee Meeting will be released within five working days.
This is what a shock and awe move is. And it better work. This is how the revised Turkish "corridor" looks as of this moment:
For now the TRY (as well as the USDJPY and thus, equity futures) is loving the move, plunging 500 pips against the dollar.
Here is the bottom line: a $10 billion taper (out of $85 billion) just caused Turkey to hike its rate by 4.25%. This is just the beginning.
In the meantime, we hope our Turkish readers don't suddenly need to take out a loan tomorrow morning. It may just be a tad more expensive.
http://www.zerohedge.com/news/2014-01-28/socgens-exuberant-response-turkish-action-governor-basci-you-have-avoided-domino-cri
SocGen's Exuberant Response To The Turkish Action: "Governor Basci, You Have Avoided A Domino Crisis In EM"
SocGen, via analyst Benoit Anne, had an almost immediate reponse to the Turkish central bank's shock and awe action. Here it is:
Hats Off To The CBRTThe CBRT did not disappoint tonight. The CBRT just announced a massive 425bp rate hike. Governor Basci, you have avoided a domino crisis in EM. The policy response to severe financial stability risks was punchy, aggressive and credible. An amazing job overall. The CBRT is now back in the game after going through a few tough weeks during which its credibility was heavily challenged by emerging market investors. Is Turkey out of the woods? Not quite of course. There are still two major issues. On the domestic side, the political environment continues to be quite challenging, with little sign this will improve anytime soon. Meanwhile, the global backdrop remains quite challenging for GEM at this point, and we are still very much in the middle of our Doom phase. So while the CBRT has done a great job at containing financial stability risks, there is going to be more work to do. In any case, I definitely feel much better about the TRY, at least on a tactical basis. Hence we just entered a long TRY/ZAR targeting a tactical move to 5.10. The TRY crisis is over.
So... a 3% drop in the S&P from all time highs, a $10 billion taper, and the world was on the verge of an EM "domino crisis" - is this your centrally-planned stability? Of course, tomorrow the Fed will taper another $10 billion: do we repeat the entire exercise from square one then?
As for the "TRY crisis being over" let's wait to see what the "popular" response is to this epic rate hike first thing tomorrow when Turkey awakes, shall we, and let's revisit the TRY crisis in 2-3 weeks when the country's housing market crumbles, when the economy grinds to a halt and the political crisis goes from worse to worse-est.
http://www.zerohedge.com/news/2014-01-28/world-markets-react-turkeys-450bps-rate-hike
World Markets React To Turkey's 425bps Rate Hike
Judging by the reaction from SocGen and JPY crosses (and thus global equity markets), the Turkish Central Bank's decision - to tighten aka ubertaper - has solved all the tapering, tantruming, turmoiling problems in markets. TRY obviously dumped on the news (now at 2.18 -2100 from highs). JPY crosses instantly exploded higher, automatically lifting US (Dow +60) and Japanese (NKY +110) stock futures markets before they closed. Gold fell very modestly ($1). JPY continued to weaken and when markets re-opened, gold dropped further (-$6 at $1250); Dow is now +110 from pre-Turkey, NKY +175pts; S&P futures are up 10points on the news as stops are run to 1800 but the EEM ETF rallied around 1% (only).
TRY is ripping.. these are 2-week lows (or highs for the Lira against the USD)
EEM rallied then faded to a ~1% gain...
JPY was ramped and stocks followed...
Bear in mind that the 1,800 stop witch hunt perfectly tags the closing VWAP from Friday's dump-day - the big question is do we get follow-through...
But the Nikkei can't get enough...
Gold fell modestly on the news... and more when markets reopnened...
The sound of one hand clapping from Prime Minister Erdogan .....
Turkish central bank makes massive rate hike to stem lira fall
0
Turkey's Central Bank Governor Erdem Başçı speaking to press at the meeting to announce the quarterly inflation report on Tuesday (Photo: Today's Zaman)
29 January 2014 /REUTERS, İSTANBUL
Turkey's central bank hiked all of its main interest rates in dramatic fashion at an emergency policy meeting, ignoring opposition from Prime Minister Recep Tayyip Erdoğan as it battles to defend a crumbling lira.
The lira strengthened to 2.18 against the dollar after the decision from 2.25 late on Tuesday, having hit a record low of 2.3900 early on Monday.
Erdoğan, keen to maintain economic growth ahead of an election cycle starting in two months, has been a vociferous opponent of higher borrowing costs, railing against what he describes as an "interest rate lobby" of speculators seeking to stifle growth and undermine the economy.
"I would like you to know that as always, I am against a hike in interest rates today," Erdoğan told reporters late on Tuesday, hours before the bank's emergency meeting, adding:
"But of course I don't have the authority to interfere with the central bank ... the responsibility belongs to them."
The central bank had been struggling to contain the lira's precipitous slide, with investor confidence damaged by a corruption scandal shaking the government and the global impact of a cut in US monetary stimulus.
Reluctant until now to make an outright rate hike, the central bank has instead tried to defend the currency by burning through forex reserves and trying to squeeze up borrowing costs on the margins - a battle it had clearly been losing and one which it has now decisively abandoned.
In a statement, the bank said it would maintain tight monetary policy until the inflation outlook showed a clear improvement.
Turkish central bank makes massive rate hike to stem lira fall
0
Turkey's Central Bank Governor Erdem Başçı speaking to press at the meeting to announce the quarterly inflation report on Tuesday (Photo: Today's Zaman)
29 January 2014 /REUTERS, İSTANBUL
Turkey's central bank hiked all of its main interest rates in dramatic fashion at an emergency policy meeting, ignoring opposition from Prime Minister Recep Tayyip Erdoğan as it battles to defend a crumbling lira.
The lira strengthened to 2.18 against the dollar after the decision from 2.25 late on Tuesday, having hit a record low of 2.3900 early on Monday.
Erdoğan, keen to maintain economic growth ahead of an election cycle starting in two months, has been a vociferous opponent of higher borrowing costs, railing against what he describes as an "interest rate lobby" of speculators seeking to stifle growth and undermine the economy.
"I would like you to know that as always, I am against a hike in interest rates today," Erdoğan told reporters late on Tuesday, hours before the bank's emergency meeting, adding:
"But of course I don't have the authority to interfere with the central bank ... the responsibility belongs to them."
The central bank had been struggling to contain the lira's precipitous slide, with investor confidence damaged by a corruption scandal shaking the government and the global impact of a cut in US monetary stimulus.
Reluctant until now to make an outright rate hike, the central bank has instead tried to defend the currency by burning through forex reserves and trying to squeeze up borrowing costs on the margins - a battle it had clearly been losing and one which it has now decisively abandoned.
In a statement, the bank said it would maintain tight monetary policy until the inflation outlook showed a clear improvement.
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