Macro and Politics

*TL assets plunged yesterday amid rising political unrest. In the midst of a flurry of domestic political angst, Turkish assets saw a sharp sell-off yesterday. The USDTRY surged past 41.50, while the EURTRY soared above 45.20, both marking record highs. Meanwhile, Turkey 10-year bond yield climbed above the 30% level. After hitting record levels, exchange rates saw a rapid pullback, yet they remained at elevated levels compared to yesterday morning’s opening. The USDTRY, which had been trading just above 36.70 in the early hours, has since stabilized around 38. Similarly, the EURTRY, which was hovering just above 40 earlier in the day, has steadied near 41.5. According to a Bloomberg report yesterday, citing a CBT official, state banks sold approximately $8-9 billion by midday to support the lira after the currency plunged as much as 11%. Following heightened market volatility, the Treasury and Finance Minister Şimşek sought to reassure investors in a social media statement, remarking that “All necessary measures are being taken to ensure the orderly functioning of the markets. Our commitment to the ongoing economic program remains unwavering.”

* The CBT will release weekly foreign portfolio flows, money & banking statistics, and international reserves for the period of March 7 – 14 @ 14:30 local time. Based on our calculations upon the CBT’s analytical balance sheet, we estimate that during the week of March 7 – 14, the gross FX reserves climbed by USD1.1bn to USD171.1bn and net international reserves rose by USD1.5bn to USD75.7bn. We anticipate that today’s official reserve data will likely reflect a similar trend in line with our calculations. To recall the data from the previous week: During the week of February 28 – March 7, foreign investors recorded a net purchase of USD216.3mn in the equity market, marking the strongest foreign inflow since the week of January 24. Meanwhile, they were net sellers in the bond market (excluding repo transactions), registering an outflow of USD159.mn, which led to a slight decline in their share of the total bond stock to 8.1% from 8.2%. Moreover, during the same period, residents’ FX deposits rose notably, primarily driven by corporate FX demand, bringing the total increase since the beginning of the year to USD7.4bn. Accordingly, during this period, the residents’ total FX deposits (including gold, price adjusted) saw a palpable increase of USD2.5bn in the week of February 28 – March 7. Besides, the CBT’s gross FX reserves climbed by USD4.6bn to USD170bn, while net international reserves surged by USD5.9bn to USD74.2bn. Net reserves excluding swaps rose by USD5.1bn to USD65.7bn, while swap stock increased by USD0.8bn to USD8.5bn.