Turkish Credit Risk Falls to Three-Year Low on Economic Gains

Turkey's credit risk has dropped to its lowest level in over three years, reflecting improved investor confidence. The cost to insure the country's debt against default fell sharply this week. A key indicator, the five-year credit default swap (CDS), reached its lowest point since May 2018. A CDS acts as a financial insurance policy; a lower price signals that markets see less risk of a country failing to repay its debts. Several economic factors are driving the positive shift. The Turkish economy has now grown for 21 consecutive quarters. At the same time, the high rate of inflation has recently begun to slow. Furthermore, weaker domestic demand for physical gold has eased pressure on Turkey's current account deficit. This combination of sustained growth, cooling inflation, and a strengthening external balance is boosting market sentiment.