The CDS does not seem to be pricing that in (5 year is still under 500 and, if anything, is tighter from the start of the festivities). PS. All the nasty sh*t that their CB did to protect the lira seems to have worked, at least temporarily.
With Lira collapsing, there CB with 25-26 Billion US as Foreign Reserves, I do not see how it's remotely possible not to mass default... Don't forget the shorts smell blood on there currency, they will have to spend there Foreign Reserves or let it crash. The minimum they need is 20 Billion for regular business transactions. How can they escape 2019 ? It's so bad SP had to, not downgrade them cause it would obliterate them... Maybe some will buy there bad loans like IFC, who knows tho https://ahvalnews.com/turkish-lira/turkey-central-bank-raises-swap-limit-third-time-two-weeks
They will let the currency collapse, EM CB banks always do. Also, along the usual EM lines, they will probably rescue some companies (banks, other systemic industries as well as friends of the principal) and let the rest default. Nothing to see unless you have access to their local market (there is not enough exposure to Turkish debt to cause a contagion, at least not that I know about).
Turkey sovereign yield curve is still in heavy backwardation. Look at how unhealthy this thing is. The recession has just begun, 1/3 of companies in XU100 have a net debt/ebitda > 4.5, all in USD denominated debt. Even better news for sellers, President Erdogan does not believe in economic theory (interest rates are EVIL, did you know?), the finance minister is his relative, there won't be any liquidity providers for some time.
Perhaps by then Turkish government should arrange for a bridge loan from it’s oil and gas rich allies eg Qatar, Azerbaijan and Kazakhstan thus circumventing IMF.
Let's see how prudent Erdogan will announce default or pull some other stunts like recent ones. It's crazy
Financial Times exposed the Turkish CB!!! https://www.ft.com/content/9718e75e-611d-11e9-b285-3acd5d43599e Where things get interesting is what happened next: by April 5, the net reserve figure had swelled to $23.6BN, boosted by an increase in swaps. However, excluding swaps, net foreign assets have stood at less than $11.5bn during the entire month of April, down from $28.7bn at the start of March on the same basis. In other words, Turkey is officially misrepresenting its current reserves by as much as 100% just to give the impression that it can continue defending the lira, when in reality is it using the very same dollars - swapped out from commercial banks - that the local population had converted into dollars as part of their flight away from the lira. The condemnation from the analyst community was brutal: Piotr Matys, an emerging market currency strategist at Rabobank, said the use of swaps seemed to be “some sort of window dressing” to create the impression of higher reserves.
Turkey is weeks away from financial collapse if they do not seek IMF Bail out... Rumour flying around is that they will mass default on foreign debt, and pivot towards Russia-China Spain banks will be greatly affected
Their fx reserves shrank significantly I guess they won't survive speculative attack that's why they try to restrict shorts at any price.