Macro and Politics

* The Treasury tapped the domestic markets to the tune of TL26.8bn (including non-competitive sales) via yesterday’s 5y CPI-linker and 10y fixed coupon bond auctions. The new 10-year bond maturing September 5, 2035 will become the benchmark issue following yesterday’s auction, replacing the current 27.09.2034 maturity in the secondary market. The bid – to – cover ratio was high at 4.89x for CPI-linker, indicating robust demand, while the real compounded rate was %6.21. For the fixed coupon bond auction, the bid – to – cover ratio was also elevated at 4.80x with an average cost of borrowing at 32.09%. Accordingly, the Treasury finalized its domestic borrowing program for September, bringing total domestic borrowing since the beginning of the month to TL273.4bn, which is significantly below the initial projection of TL346bn. The Treasury will release its next three-month (October – December 25’) domestic borrowing strategy on September 30^th @ 17:30 local time. According to the previous program (September – November 25’), The Treasury has a domestic redemption of TL263.5bn in October, while in return plans to borrow TL350.7bn throughout the month.

* Housing sales rose to 143,319 units in August, marking an annual increase of 6,8% and a mere 0.3% rise m/m. Mortgage-backed sales recorded an annual rise of 45.2% and a monthly rise of 7% during this period, reaching 19,712 units. Turning to mortgage interest rate dynamics, the average mortgage rate stood at 43.53% in August 2024 and eased marginally to 40.36% in August 2025, signaling a rather limited annual decline. The y/y increase in mortgaged home sales appears to have been driven by expectations of further price appreciation, despite mortgage rates remaining elevated above 40%. These expectations are likely supported by the recent stabilization in real house price depreciation, following an extended period of real term decline. The August data suggest that both the momentum in mortgage-backed sales and the underlying price dynamics persisted during the month. Turning to the breakdown of housing sales data, a total of 1,810 units were sold to foreigners in August, marking an 19.8% y/y decline. In the same month, sales to foreign buyers accounted for 1.3% of total housing transactions.

* The Residential Property Price Index (RPPI) rose by 2.5% m/m and 31.4% y/y in August, reaching a level of 192.5. Yet, in real terms, the index posted an annual decline of 1.2%. Although the annual real depreciation in housing prices has persisted uninterruptedly since February 2024, the pace of this depreciation has been moderating. 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.