TRY should be better supported due to a cut to 1-week repo rate by CBRT: UniCredit

Quotes from UniCredit Research:

-On Tuesday, the CBRT cut the 1-week repo rate by 25bp to 7.5%, in the second consecutive cut of the year. The O/N borrowing rate was also cut by 25bp to 7% while the O/N lending rate by 50bp to 10.75%. The cut to the 1-week repo rate came in 25bp lower than we expected, but was timely in our view given the slow disinflation processand high TRY volatility to date.

-In the short term, the currency should be better supported due to the cut, the Fed's more dovish testimony and the lower oil prices. Local bonds have rallied following the cut and we think this rally will continue as TRY stabilizes and the market anticipates lower inflation, which will push real yields increasingly positive.