attack on KKM

According to data from the Banking Supervision and Regulation Agency (BDDK), KKM accounts, which reached $102.3 billion as of April 14, now make up a significant part of the total forex and TL deposits of $531 billion.

While KKM’s account sizes increased by $10 billion with intense demand in the two weeks leading up to the holiday, monthly revenue at KKM doubled in TL and exceeded 20%.

“A CURRENCY REQUEST MAY OCCUR” MESSAGE FROM BANKERS

Pointing out that with the reduction of the minimum maturity period of individual accounts from three months to one month, the bankers draw attention to the fact that the end of maturity in KKM will be more frequent after the election, and that there will be a return of 10 billion dollars every week after the election, and that demand for foreign exchange will arise if KKM’s overdue accounts are not renewed or returned to TL.

According to information provided by senior bankers interviewed by Reuters, there are two reasons for the recent rise in interest rates. The first of these is the release of interest on KKM and TL deposits, which are limited by the sector’s legal regulations due to the growing demand for foreign currency. The second is the concern that the TL will lose more value after the elections.

Many bankers, including foreign institutions, see the “fair” value in USD/TL, which is currently around 19.5, in the 23-25 ​​range.

The main factor driving interest in currencies is the growing view that the dollar/TL is priced lower than it should have been before the May 14 election under current policies and that the TL should depreciate. The CBRT, on the other hand, lost $5.4 billion in reserves last week to limit the growing demand for foreign currency.

“AFTER THE ELECTION, WE WILL SEE A PERMANENT HIGH AMOUNT OF REDEMPTION EXPERIENCED EVERY WEEK”

A senior private sector banker said: “As the due date is much more frequent at KKM, the accounts will become a bit more difficult. But this will bring us a new era. The KKM swap, which must be renewed every week in the first stage, will reach $10 billion. We will see a permanent high amount of redemption occur every week after the election. You have to see how the renewals will be affected by the election and what kind of demand for foreign currency this will generate, ”he said.

Banks have the goal of converting foreign currency deposits to TL every month. KKM helps banks to meet the target as they are counted as TL deposits.

While the TL interest given to KKM accounts with a maturity of one month has risen to just over 20%, bankers say that the yield on transactions with large volumes has reached 24%.

THE END OF MATURITY WILL COME VERY OFTEN NOW

The minimum maturity for KKM accounts, which started with a maturity of six and one year for institutions when first opened, has been lowered to one month.

Four bankers, whose calculations were referred to by Reuters, estimate that there will be significant repayments from KKM every week in the coming period, with $8bn this week, $6bn next week and $11-12bn the week after. of the elections.

KKM account expiration dates are closely monitored, especially in periods with large repayments. Finally, a large number of KKM accounts had expired in the summer of last year. About a third of the expired KKMs had a demand for foreign currency, 15% had been converted to TL, and the remaining 55% were completed by renewal. Until last month, interest in KKM was waning because it did not offer attractive returns.

The bankers also draw attention to the fact that it is not clear whether the KKM will continue after the first round of the elections on May 14. For this reason, they point out that they will monitor whether the high permanent redemption periods will create a demand for foreign exchange after the election.

KKM’s interest rates are not the only ones that rise in this period. With the exception of the CBRT policy rate, which is the exception, all interest rates have an upward trend. REUTERS