Macro and Politics

* The Treasury will hold 4y TLREF & 5y fixed coupon bond auctions today. The Treasury tapped the domestic markets to the tune of TL28.1bn (including non-competitive sales) via yesterday’s 7y FRN bond auction. The bid – to – cover ratio was high at 9.61x, indicating robust demand, while the real compounded rate materialized at 22.14%. Accordingly, the total domestic borrowing for the month reached TL164.1bn. After today’s double auctions, the Treasury will hold the direct sales of 1y USD-denominated bond & 1y USD-denominated lease certificate on August 21, Thursday, finalizing its domestic borrowing program for August. According to its three-month (August – October 2025) domestic borrowing program, the Treasury faces a hefty domestic redemption of TL339bn in August, while in return it plans to borrow TL440.8bn in total throughout the month, indicating a roll-over ratio of 130%.

*The Residential Property Price Index (RPPI) rose by 0.9% m/m and 32.8% y/y in July, reaching a level of 187.8. Yet, in real terms, the index posted an annual decline of 0.5%. Although the annual real depreciation in housing prices has persisted uninterruptedly since February 2024, the pace of this depreciation has been moderating since October. Notably, the 0.5% year-on-year decline recorded in July marks the smallest real loss in value observed since February 2024. We believe that the recent annual increase in mortgaged home sales, despite mortgage rates remaining elevated above 40%, was partly driven by expectations of future price hikes, as real house prices—having been in decline for some time—have recently shown signs of stabilization. Looking ahead, we expect the annual change in real house prices to turn positive in the near term.

* The short-term external debt stock in June materialized at USD168.2bn, down by 0.4% m/m.  In terms of short-term debt statistics, we believe that “debt stock on a remaining maturity basis,” calculated based on the external debt maturing within 1 year or less regarding the original maturity, is rather critical, which is at USD220.3bn as of June 2025. Of this total, USD25bn is attributed to loans taken by resident banks and private sector affiliates from their branches and affiliates abroad. Stripping this amount from the total results in USD195.3bn. We also add 12-month forward-looking CAD expectations on this amount so as to reach Turkey’s annual external financing need (EFN).  Accordingly, we calculate EFN as of June 2025 around USD220bn.