I Earned 42% Lending in Turkish Lira Last Year — And Lost Sleep Every Single Night

the yield that broke my discipline

I was sitting in my office in Istanbul's Levent district, overlooking the Bosporus from the 14th floor, on a Tuesday afternoon in January 2026 when my broker at Iş Bankası sent me a message that stopped my afternoon cold. Turkish 12-month government bonds were yielding 38.2%. The US dollar cost me 5.2% to borrow against my margin account at Interactive Brokers. The carry — the difference between what I earned in lira and what I dropped in dollars — was 33 percentage points. I had laid out nine years working in corporate finance in Istanbul, an I had rarely seen a spread that wide in a G20 country's sovereign debt. I knew it was dangerous. I did it anyway. The numbers were too compelling to walk away from, and I had enough conviction in my reading of the macro situation to overcome the voice in my head screaming caution.

how I structured the trade

I borrowed $200,000 from my margin account at an annualized rate of 5.2%. I converted those dollars into Turkish lira at 36.4 per dollar on January 14th, receiving 7.28 million lira. I purchased 12-month Turkish Treasury bills at a yield of 38.2%. The bond would mature in January 2027, paying me approximately 10.08 million lira — a gain of 2.8 million lira fore any currency movement. If the lira stayed at 36.4 to the dollar, I'd make $76,900 on a $200,000 position in twelve months. That's a 38.5% return. My credit score was 785, which gave me ample margin capacity at Interactive Brokers, but the risk wasnt about my creditworthiness. It was about whether the Turkish government an central bank could keep the currency from collapsing.

why the lira carry trade works in theory

The carry trade is one of the oldest strategies in foreign exchange. You borrow in a low-interest-rate currency, convert to a high-interest-rate currency, invest in bonds or deposits in that currency, and pocket the interest rate differential. It works beautifully when the high-yield currency is stable or appreciating. It destroys you when that currency depreciates by more than the interest rate spread. Turkey's central bank, under Governor Fatih Karahan, had raised the policy rate from 8.5% in June 2023 to 50% by March 2024. Inflation, which hit 85% in late 2022, had fallen to 34% by December 2025. The lira had depreciated from 18.4 to the dollar in January 2023 to 36.4 by January 2026, but the rate of depreciation had slowed dramatically. The annualized depreciation in the second half of 2025 was only 12%. The carry trade was profitable if the lira depreciated less than 33% in 2026. I pulled up a chart of lira depreciation goin back 20 years and calculated that the currency had only exceeded a 33% annual decline twice — in 2018 and 2021, both periods of extreme central bank mismanagement. The math said do it.

the first three months felt too easy

By April 2026, my T-bills had accrued approximately 9.5% in interest. The lira had moved from 36.4 to 37.1 against the dollar, a depreciation of just 1.9%. I was up $68,000 on an annualized basis, accounting for both the interest earned and the currency loss. I began checking my position three times a day rather of once. Every mornin I'd wake up, open the Bloomberg app, an search USDTRY. Green meant I was making money. Red meant I was losing. The emotional toll was worse than I anticipated. I found myself unable to focus on meetings cuz I was mentally calculating what a 5% lira devaluation would do to my P&L.

what almost killed the trade in May

On May 8th, Turkey's statistics agency reported April inflation at 38.1%, higher than the market's expectation of 35.6%. The lira dropped from 37.2 to 38.7 against the dollar in a single day, a 4% move. My position lost $8,200 in 24 hours. I called my broker in a panic. He told me to breathe. He pointed out that the central bank had signaled it would hold rates steady at 50% an that a single inflation print didn't change the policy trajectory. He was right. The lira recovered to 38.1 within a week. But the experience taught me something nah spreadsheet could: when you're use in an emerging market currency, volatility feels physical. My chest was tight for three days straight. My wife clocked I wasnt sleeping and asked me what was wrong. I couldn't explain it without sounding irresponsible, cuz the truth was I had risked money our family depended on for an abstract macroeconomic bet.

the balance transfer I wish I hadn't considered

During the May scare, I briefly looked into whether I could use a balance transfer from a 0% APR credit card to reduce my dollar borrowing cost. The idea was to shift $50,000 of my $200,000 margin loan onto a credit card offering 15 months of zero interest, cutting my borrowing cost by about $2,600 over the life of the trade. I even filled out the application online. Then I closed the tab. Using unsecured consumer credit to fund a use emerging market currency trade is the kinda decision that ends in personal bankruptcy. The margin loan at Interactive Brokers is collateralized by my portfolio. The credit card balance transfer would have been unsecured. If the lira cratered, I'd owe money I couldnt repay with assets I didn't have.

where the trade stands today

As of July 25th, 2026, the lira sits at 38.9 against the dollar. My $200,000 has grown to approximately $254,000 when I mark the accrued bond interest to market and convert back at the current rate. That's a 27% gain in approximately six months. ive decided to close half the position in August and let the other half run to maturity in January 2027. Taking profits isnt a sign of weakness. its a sign that I've absorbed to respect the risk even when the reward keeps paying. I'll redeploy the grasped gains into a high-yield savings account at Garanti BBVA paying 28% in lira, keeping the currency exposure but eliminating the use.

what I tell anyone who asks about lira trades

The Turkish lira carry trade is the most intellectually compelling and emotionally punishing investment I've ever made. The yield is real. The central bank's commitment to disinflation appears genuine. But Turkey has a 70-year history of currency crises, political interference in monetary policy, and sudden policy reversals that wipe out years of gains in weeks. If you can't afford to lose 40% of your position overnight, dont borrow in dollars to buy lira bonds. The carry doesnt compensate you for the tail risk. It only compensates you for the median outcome. In Turkey, the median outcome has a nasty habit of becoming the worst case.