Business · Markets · 1 hr ago
BBVA says Turkish lira carry trades may remain attractive through year-end
BBVA says investments that seek to earn returns from Turkey’s relatively high interest rates may remain attractive through the end of the year.
The view concerns carry trades involving the Turkish lira, in which investors seek interest income while taking on the risk of changes in the currency’s value.
BBVA expects Turkey’s central bank to cut its policy rate by 100 basis points at its next meeting.
It says another cut of the same size is possible if conditions abroad do not worsen sharply.
Even if two such cuts come in October and December, BBVA estimates that gross monthly carry returns would stay around 2.9%.
The bank says the key issue is whether the central bank can limit the lira’s loss in value while keeping real interest rates sufficiently positive.
This differs from Goldman Sachs economists, who have described expectations of an October rate cut as premature.
BBVA says Turkish lira carry trades may remain attractive through the end of the year despite expected interest-rate cuts.
The bank expects the Central Bank of the Republic of Türkiye to cut its policy rate by 100 basis points at its meeting next week.
BBVA says another 100-basis-point cut could be possible if external conditions do not deteriorate sharply again.
It estimates that two 100-basis-point cuts in October and December would leave gross monthly carry returns at about 2.9%.
BBVA's view differs from Goldman Sachs economists, who consider expectations of a rate cut in October premature.
- Who
- BBVA, with its view described by Global Markets Strategy Director Tufan Cömert.
- What
- BBVA says Turkish lira carry trades may stay attractive despite expected interest-rate cuts.
- When
- The analysis was published on October 12, 2026. BBVA expects a rate cut at the central bank's meeting next week.
- Where
- Türkiye.
- Why
- BBVA says rate cuts would not automatically weaken the carry trade, and expects the carry buffer to remain significant.
BBVA
Goldman Sachs economists
Timing of a rate cut
BBVA
BBVA expects a 100-basis-point cut at the central bank's meeting next week.
Goldman Sachs economists
Goldman Sachs economists consider expectations of a rate cut in October premature.
rate cuts by the Central Bank of the Republic of Türkiye do not automatically weaken the carry story
The key issue is not whether the Central Bank of the Republic of Türkiye cuts rates; it is whether it continues to manage the cycle in a way that keeps nominal depreciation under control and preserves sufficiently positive real rates.
Inflation data came in milder than expected, one factor BBVA cited in its rate-cut forecast.
Bloomberg HT published BBVA's analysis of Turkish lira carry trades.
BBVA expects the central bank to cut its policy rate by 100 basis points at its meeting.
BBVA says two 100-basis-point cuts in those months would leave gross monthly carry returns at about 2.9%.
- Expected policy-rate cut
- 100 basis points at the central bank's meeting next week
- Further possible cut
- Another 100 basis points if external conditions do not sharply deteriorate
- Gross monthly carry return
- About 2.9% after two forecast cuts in October and December
- Rate after a 100-basis-point cut
- 36%
- Simple monthly interest return
- About 3.08% before the cut and 3.00% after it
Sources
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