Macro and Politics

* The Treasury will hold the direct sales of 1y USD-denominated bond and 1y USD-denominated lease certificate today and finalize its domestic borrowing program for July. The Treasury tapped the domestic markets to the tune of TL23.8bn via yesterday’s direct sale of 5y lease certificate. Accordingly, the Treasury’s total domestic borrowing since the beginning of the month has reached TL277.5bn. According to three-month (July – September 2025) domestic borrowing program, the Treasury has a domestic redemption of TL316.6bn in July, while in return it plans to borrow TL376.4bn in total throughout the month, indicating a roll-over ratio of 119%. Having already raised TL277.5bn through domestic borrowing this month, the Treasury is likely to borrow around TL100bn via today’s direct sales.

* The CBT released the results of the July Market Participants’ Expectations Survey. Following a decline from 30.35% to 29.86% in the June survey, year-end inflation expectations continued to edge lower in July, falling to 29.66%. The 12-month ahead CPI expectation dropped from 24.56% to 23.39%, while the 24-month ahead forecast eased slightly from 17.35% to 17.08%. Moreover, participants’ median monthly CPI forecast for July stands at 2.11%. Based on our compilation of price data so far, we expect monthly inflation to come in somewhat above the survey median, at around 2.4%. While we maintain our year-end inflation forecast at 31%, we continue to see risks moderately tilted to the downside. In terms of monetary policy expectations, participants foresee a 270bps rate cut at this week’s Monetary Policy Committee (MPC) meeting, followed by an additional 240bps cut in September. By year-end, the policy rate is expected to decline to 36.16%. As for our house view, we expect the MPC to lower the policy rate by 250bps to 43.5% at Thursday’s rate-setting meeting. Starting in July, we foresee the CBT proceeding with monthly rate cuts of 250bps, bringing the policy rate down to 36% by year-end.