“I’ve Never Seen A Move Like This In The 21 Years I’ve Been Watching This Market”

Wednesday, March 27, 2019
By Paul Martin

by Tyler Durden
Wed, 03/27/2019

In Turkey’s ongoing attempt to crush currency manipulators, yesterday we reported that in addition to launching a “probe” against JPMorgan, the biggest US bank, for daring to cut its TRY price target, as well as threatening unnamed “manipulators”, on Monday Turkish authorities took a page of the Chinese currency manipulation playbook, when they made it virtually impossible for foreign investors to short the lira as they soaked up virtually all intermarket liquidity, potentially threatening to kill the economy.

As we reported yesterday, the overnight swap rate on Monday soared more than ten-fold over the prior two sessions to more than 300%, the highest spike on record going back to the nation’s 2001 financial crisis as offshore funds clamoring to close out long-lira positions failed to find counterparties and the cost of a lira short exploded.

Think Volkswagen short squeeze but for a currency, or FXwagen.

Well, FXwagen went turbo on Tuesday, when this unprecedented move continued as Turkish Lira swaps exploded again, more than doubling overnight, and hitting an insane 1338%.

With the cost of borrowing liras overnight hitting unprecedented levels – because local banks are under pressure not to provide liquidity to foreign fund managers who want to bet against the lira – this forced investors who want out of their lira positions to instead sell other Turkish assets to access the currency they need to close those trades.

This forced investors to dump Turkish bonds and stocks on Wednesday, sending local markets in freefall, and pushing the yield on two-year Turkish bonds jumped above 20% on Wednesday while stocks slid the most since August.

The Rest…HERE

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