Turkey’s Central Bank raises swap auction limit

Central Bank has increased the Turkish Lira’s swap auction limit from 50 percent to 60 percent. The limit has been gradually increasing since last April.

İstanbul

Turkey’s Central Bank raises swap auction limit

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The Central Bank of the Republic of Turkey has increased its lira swap sale limits from 50 percent to 60 percent. As reported by the state-run Anadolu Agency (AA), the bank raised the swap auctions limit in the Turkish Lira Swap Market for Foreign Exchange today (November 26).

The Central Bank previously increased the limit from 40 to 50 percent in May. The limit has been increasing gradually since last April from 20 percent.

What is Swap?

Investopedia website explains swap briefly as follows:

"A swap is a derivative contract through which two parties exchange the cash flows or liabilities from two different financial instruments. Most swaps involve cash flows based on a notional principal amount such as a loan or bond, although the instrument can be almost anything. Usually, the principal does not change hands. Each cash flow comprises one leg of the swap. One cash flow is generally fixed, while the other is variable and based on a benchmark interest rate, floating currency exchange rate or index price.

"The most common kind of swap is an interest rate swap. Swaps do not trade on exchanges, and retail investors do not generally engage in swaps. Rather, swaps are over-the-counter contracts primarily between businesses or financial institutions that are customized to the needs of both parties."

(HA/SD)