Macro and Politics

* The Treasury tapped the domestic markets to the tune of TL35.3bn (including non-competitive sales) via yesterday’s 2y fixed coupon and 7y FRN bond auctions. The Treasury issued a new 2y fixed-coupon bond yesterday, which will replace the February 10, 2027-maturity bond as Turkey’s new benchmark bond once it begins trading. The average cost of borrowing was 47.19% for 2y fixed-coupon auction, while the bid – to – cover ratio was 1.57x. For 7y FRN, the term rate was 22.77 and the bid – to – cover ratio was 1.84x. According to three-month (May – July 2025) domestic borrowing program, the Treasury has a domestic redemption of TL160.7bn in May, while in return it plans to borrow TL187.5bn in total throughout the month via four auctions and two direct sales. Following yesterday’s dual auctions, the Treasury will hold 4-year TLREF-indexed and CPI-indexed bond auctions on May 13^th and conduct direct sales of 1-year gold-denominated bonds and lease certificates on May 20th, thereby finalizing its domestic borrowing program for May.

*The Real Effective Exchange Rate (REER) decreased further from the revised level of 73.67 to 72.12 in April, in line with our calculations. Accordingly, the Turkish lira registered a real depreciation of 2.1% in April. Having been on a weakening trend in real terms since February, the Turkish lira has posted a cumulative real depreciation of 4.2% over the past three months.