Macro and Politics

* The Treasury will hold 1y TLREF-indexed and 4y fixed coupon bond auctions as well as a direct sale of 2y lease certificate today. The Treasury tapped the domestic markets to the tune of TL62.6bn (including non-competitive sales) via yesterday’s 2y fixed coupon bond auction. According to three-month (April – June 2025) domestic borrowing program, the Treasury has a domestic redemption of TL293.3bn in April, while in return it plans to borrow TL329.5bn in total throughout the month via six auctions and three direct sales.

* The Treasury and Finance Ministry will release March cash budget figures @ 17:30 local time. The Treasury’s cash balance posted a deficit of TL397.6bn in February, with the primary balance showing a deficit of TL265.9bn. The central government budget, on the other hand, recorded a deficit of TL310.1bn in February, while the primary balance posted a deficit of TL170.4bn. As such, the budget deficit in the second month of the year was approximately TL87.5bn lower than the cash deficit, highlighting the continued divergence between the accrual-based and cash-based budget. While cash-based performance is likely to remain weak, in the absence of a forthcoming improvement in the cash budget, we believe that upside risks to growth could intensify. We have revised our 2025 budget deficit forecast upwards, from TL1.61tn (2.7% of GDP) to TL1.9tn (3% of GDP). As 2025 is set to be the year of a decisive battle against inflation, the effective implementation of fiscal policy in greater coordination and the achievement of fiscal consolidation will be critical in striking a balance between inflation and growth.

* The equity and the bond market (excluding repo transactions) experienced net foreign outflows of USD652mn and USD2.4bn, respectively, while the substantial foreign outflow observed in the bond market during this period marked the largest foreign sale. Besides, the foreigners’ share in total bond stock tumbled from %7.6 to 6.8%, which stands for the lowest level since August 2024. Moreover, during the period of March 21 – 28, residents’ FX deposits dropped by USD554mn (excluding gold accounts and adjusted for the EUR/USD parity effect) after three weeks of consecutive rises, while their total FX deposits (including gold, price adjusted) retreated by USD383mn during the week of March 21 – 28.