July 22, 2026 · Decision research
EM Market Debt Crisis
Finding
Action upgrades from "consider" to "TRIM" - the single weakest assumption (Turkey defense runway) is intact but no longer loose. Reduce direct-TRY by ~50% and Turkish-external-debt by ~30%, keep re-entry trigger; raise confidence_delta to +0.18.
What changed
Three deltas vs. the prior sweep. (i) The April US-Iran ceasefire collapsed on 8 July 2026 with renewed strikes on both sides; Brent pushed back above $89-90 by 20-22 July. The geopolitical tail the prior sweep discounted is now re-priced in real time. (ii) The CBRT itself admitted disinflation derailed: on 14 May it lifted the 2026 inflation target from 16% to 24% and now forecasts 26% year-end, while still cutting the policy rate by a cumulative 800bps across 2026 - the easing margin has been voluntarily consumed. (iii) Peer anchors tightened further, not loosened: Egypt reached staff-level
Decision
TRIM - cut direct-TRY currency by ~50%, cut Turkish sovereign / quasi-sovereign USD external-debt by ~30%, keep short-duration USD/TRY optionality as a tail hedge. Re-entry trigger: USD/TRY below 43 on a 5-day window AND CBRT net reserves ex-swaps positive AND headline CPI YoY below 28%. Confidence_delta = +0.18 (was None) - moderate-positive conviction that the edge still favors an orderly grind rather than a rupture, but compressed runway forces a smaller gross position.
Watch next
Three triggers that would force EXIT. (1) CBRT net reserves ex-swaps turn negative on the weekly print - the historical line of last defense since 2002. (2) USD/TRY closes above 50 on two consecutive sessions. (3) Brent settles above $110 for five consecutive sessions - at that level current-account math breaks and the r* defense fails.