Macro and Politics

* The Treasury and Finance Ministry will release December central government budget figures @ 11:00 local time. Considering the seasonal impacts on budget dynamics, we project a deficit of approximately TL640bn in December, bringing the 2024 budget deficit to TL1.9tn (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. Moreover, we project the 2025 budget deficit at TL1.61tn (2.7% of GDP), remaining marginally below the official forecast of TL1.9tn (3.1% of GDP).

* The Treasury tapped the domestic markets for TL86.7bn (including non-competitive sales) through yesterday’s 4y TLREF indexed and 5y fixed coupon bond auctions. The bid – to – cover ratio was 2.92x and the term rate was 12.50% for TLREF indexed, while the bid – to – cover ratio was 2.32x and the average cost of borrowing was 32.42% for fixed coupon bond auction. Accordingly, together with Monday’s single auction, the Treasury’s domestic borrowing so far this month has now reached TL136bn. After this week’s auctions, the Treasury will hold 6m G-bond auction on January 20^th, 3y CPI-indexed and 6y FRN auctions and January 21^st and the direct sales of 1y gold-denominated bond & 1y gold-denominated lease certificate on January 24^th and finalize its domestic borrowing program for January. According to three-month (Jan – Mar 25) domestic borrowing strategy, the Treasury has a total domestic redemption of TL225.4bn in January, while in return plans to borrow TL293.8bn throughout the month, indicating a roll-over ratio of 130%, via six auctions and two direct sales.