Türkiye's risk premiums drop after US-Iran truce

Türkiye’s sovereign risk perception improved markedly after the United States and Iran agreed to a temporary halt in hostilities. The country’s five‑year credit default swap (CDS) premium, a key measure of investor confidence, decreased by 17 basis points to settle at 268 basis points. This move reversed some of the steep increases seen during the height of the conflict, when the CDS had climbed to 327 basis points in March, compared to 235 basis points before the war began.

Falling US bond yields and capital flows

The ceasefire, brokered by Pakistan just hours before President Trump’s deadline, prompted a broad risk‑on rally in global markets. US Treasury yields fell across the curve: the 10‑year yield dropped 8 basis points to 4.24%, the two‑year fell 9 points to 3.73%, and the five‑year declined 9 points to 3.86%. Lower US yields typically encourage capital flows into emerging markets, and analysts expect Türkiye to benefit from this trend as international investors regain appetite for higher‑yielding assets.

Central Bank measures to support the lira

Throughout the conflict, Türkiye’s central bank took proactive steps to prevent excessive exchange rate volatility. Banks have resumed swap transactions with the central bank, signalling that there is no foreign exchange liquidity shortage and that the exchange rate regime is functioning as intended. These measures aim to avert a lira crunch, prevent banks from facing liquidity squeezes, and keep credit conditions more reasonable. With the ceasefire reducing geopolitical uncertainty, markets appear willing to price in positive developments going forward.