Turkish markets paused last week as the Monetary Policy Committee of the Central Bank of Turkey (CBRT) met on Thursday. The CBRT was expected to keep all rates intact and did just that.Investors had priced in a lowering of reserve ratios at the policy meeting but that did not happen, which lead to a sell-off in Turkish banking stocks. After the CBRT released its decision, other positive data was released which tempered the sell-off.

Fixed income markets continued to surge as bond yields fell to their lowest levels since December, while Credit Default Swaps, which insure investors against political instability, were stable.Foreign exchange markets were also stable as the Turkish lira stood firm at 2.12 liras to the U.S. dollar.Foreign participation in Turkish equity markets took a slight dip before recovering Monday morning.

The CBRT kept the borrowing, repurchasing, and lending rates intact at 8 percent, 10 percent and 12 percent respectively. Any decrease in reserve ratios for banks would have allowed them to put more money to work but the Monetary Policy Committee decided markets were sufficiently well-funded and that conditions did not merit such easing. Investors had priced in a lowering of reserve ratios and in its absence punished banking stocks which were down across the board. As the Borsa Istanbul (BIST) indices are heavily bankingsector- weighted, the indices decreased as well.The benchmark BIST-100 index fell from 73,300 last week to 71,388 on Friday before jumping back to 72,018 Monday afternoon. It appears that the CBRT announcement was just an excuse by investors to book profits before moving markets higher.

After the release of the CBRT decision, real sector confidence numbers were released Thursday, increasing from 108.6 to 112.7. On Monday another key number on the confidence of the public was released as the Consumer Confidence Index jumped from 72.7 to 78.5 in the last month. This index is especially important for Turkey as consumer consumption makes up over two-thirds of the larger economy and any sustained improvement in the economy cannot proceed without consumer consumption. Consumer confidence had fallen to below 70 percent in February and this recent surge brings it to its highest level since mid-2012.

The balance sheets of many of the banks that fell last week were much improved recently as the sizeable amount of treasuries they hold in their coffers increased considerably in value. Both the benchmark two-year Treasury Bond and the 10- year bond saw their prices increase as their yields fell to 9.57 percent from 9.67 percent while the 10- year Treasury Bond fell to 9.84 percent from 10.02 percent. Both bonds trade at their highest levels since December and at this rate, appear to overtake their pre-crisis levels in the coming weeks.

The Central Registry Agency (MKK) released data for the last week in which foreign participation in Turkish equity markets fell from 63.8 percent down to 63.2 percent before improving to 63.5 percent on Friday as the foreign investment dominated markets took a breather.

This week trade balance numbers are released on Wednesday and in the absence of any other important announcements, investors will be looking across the Black Sea to the continuing crisis in the Ukraine. What began with the secession of Crimea may be spreading to other parts of Ukraine as pro-Russian groups have taken control of some government buildings and are holding a group of observers hostage. Any extension of the Ukrainian crisis will cause a cloud of uncertainty to remain hanging over the region, which will be bad for all countries in the near term. The United States and some of its European allies continue to target Russian individuals and those Ukrainians close to the Russian regime. Whether or not this will be enough to dissuade the Russians from supporting factions within Ukraine in their quest to further secede is yet to be seen.