Central Bank of the Republic of Turkey, raised the TRY swap rate which is used in the weekly swap transactions to 13.25% from 11.75%. CBRT had increased the swap rate from 10.25% to 11.75% on October 9.
The Central Bank continues its tightening moves by increasing the cost of USDTRY swap transactions, in which a part of the TRY funding is made. Earlier, the TRY swap rate, which was equal to the 1-week repo rate, was made equal to the Central Bank's overnight lending rate with the move on October 9. This rate has been raised above the interest rate corridor.
With the interbank market borrowing limits zeroed at the beginning of the week, banks will turn more late liquidity window (the most expensive lending rate of the Central Bank) more for their daily liquidity needs. We see that the Central Bank continues to increase the funding cost of TRY by reducing the cheaper funding channels. The WACF, which we expect to converge to the LLW level, may form around 14% by the end of this week.
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