Macro and Politics

* The Treasury will hold 3y CPI-indexed and 10y fixed coupon bond auctions as well as the direct sale of 2y lease certificate today and finalize its domestic borrowing program for December. The Treasury borrowed TL31.9bn (including non-competitive sales) from the domestic markets via yesterday’s 2y fixed coupon and 6y FRN bond auctions and the total domestic borrowing so far this month has reached TL110.3bn. According to three-month (Dec 24 – Feb 25) domestic borrowing strategy, the Treasury has a total domestic redemption of TL71.5bn in December, while in return plans to borrow TL132bn throughout the month, indicating a roll-over ratio of 185%. Hence, as per the domestic borrowing strategy, the Treasury is likely to borrow around TL22bn from the domestic markets via tomorrow’s double auctions and direct sale.

*The CBT will release the Residential Property Price Index for November @ 10:00 local time. The Residential Property Price Index registered a monthly rise of 2.1% and an annual increase of 26.8% in October, reaching a level of 151.1. Yet, in real terms, there was an annual decrease of 14.7%. It is noteworthy that the annual rise in housing prices has been remaining below the annual inflation increase since January.

* The central government budget posted a deficit of TL16.6bn in November, while the primary balance recorded a surplus of TL129.7bn in the same period. In 12-month rolling terms, the budget deficit has widened to TL2.12tn, while the primary deficit rose to TL881.9bn. Recent data indicates a budget deficit of TL1.28tn and a primary deficit of TL81.7bn for the Jan – Nov period. Considering the seasonal impacts on budget dynamics, we project a deficit of approximately TL640bn in December, bringing the 2024 budget deficit to TL1.9bn (4.3% of GDP), slightly below the 2024 Medium-Term Economic Program (MTEP) projection of TL2.15tn (4.9% of GDP). With a significant portion of the approximately TL1tn in earthquake-related expenditures for 2024 expected to be accrued in the final quarter, we anticipate a substantial widening of the budget deficit in December, similar to last year, narrowing the gap with the MTEP projections.