Macro and Politics

* TURKSTAT will release July Industrial Production (IP) figures today @ 10:00 local time. The sequential (the seasonally and calendar adjusted monthly figure) industrial production (IP) increased by 0.7% m/m in June, while the calendar adjusted IP surged by 8.3% y/y. The robust annual rise primarily reflects a low base effect; therefore, we do not expect the surge in annual data to be permanent. Examining the monthly breakdown, the highest growth was recorded in the high-technology sector, which expanded by 38.1%, followed by a 28% increase in the manufacturing of other transport equipment. The growth in this latter segment was largely driven by strong external demand for defense and aerospace exports. According to Turkish Exporters Assembly (TİM) data, defense and aerospace exports maintained strong momentum in July, and we expect this segment to continue contributing positively to industrial production during that month. However, it is noteworthy that the June monthly increase was not broad-based. Excluding the high-technology and other transport equipment sectors, a weakening trend in industrial production becomes apparent. Accordingly, consistent with signals from leading indicators, we anticipate the underlying trend in real sector activity to remain subdued.

* The Treasury tapped the domestic markets for TL99.6bn (including non-competitive sales) through yesterday’s 2y and 5y fixed coupon bond auctions. Accordingly, the Treasury’s total domestic borrowing so far this month has reached TL246.7bn. After this week’s auctions, the Treasury will hold 5y CPI-linked and 10y fixed coupon bond auctions on September 16 and finalize its domestic borrowing program for the month. The new 10-year bond maturing September 5, 2035 will become the benchmark issue following its September 16 auction, replacing the current 27.09.2034 maturity in the secondary market. According to its three-month (Sept – Nov 2025) domestic borrowing program, the Treasury faces a domestic redemption of TL255.8bn in September, while in return it plans to borrow TL346n in total throughout the month, indicating a roll-over ratio of 135%. As per the Treasury’s domestic borrowing program, the two auctions scheduled for next week are expected to raise approximately TL99 billion in funding.

* As part of the 2025 external borrowing program, the Treasury has mandated BBVA, Deutsche Bank, Goldman Sachs and JP Morgan for the issuance of a 10-year USD denominated bond. Initial price guidance is reported to be around 7.30%, compared to a yield of 7.45% achieved in the Treasury’s previous 10-year USD issuance in May 2025. Year-to-date, the Treasury has secured USD4.5bn from international capital markets. For the full year 2025, the Treasury targets a total of USD11bn in external financing, suggesting further sizeable issuance in the months ahead.