Macro and Politics

* The Treasury will hold a direct sale of a 2-year lease certificate indexed to the TLREFK (Turkish Lira Overnight Participation Reference Rate) and a 5-year fixed-coupon bond auction today. The Treasury tapped the domestic markets to the tune of TL42.4bn via yesterday’s 8m zero coupon bond auction, with average cost of borrowing at 40.32%. According to the three-month (October–December 2025) domestic borrowing strategy, the Treasury plans to borrow a total of TL290.1bn through five auctions and one direct sale, against redemptions of TL263.6bn in October. After this week’s auctions, the Treasury will offer a 5-year CPI-indexed bond on October 13, and 2-year and 10-year fixed-coupon bonds October 14, thereby concluding its October domestic borrowing program.

* The Treasury and Finance Ministry will release September cash budget figures @ 17:30 local time. The central government budget posted a surplus of TL96.7bn in August, while the primary balance recorded a surplus of TL276.4bn. In the same period last year, the budget recorded a deficit of TL129.6bn and a primary deficit of TL32.5bn in the same month of last year. On a 12-month rolling basis, the budget deficit narrowed from TL2.3tn to TL2tn, while the primary deficit contracted from TL417bn to TL108bn. In the Jan – Aug period, the budget deficit reached TL907.6bn, corresponding to 47% of our 2025 full-year deficit forecast, whereas the primary balance registered a surplus of TL518.1bn. Please note that we have recently revised our year-end 2025 budget deficit forecast upward from TL1.9tn (3.1% of GDP) to TL2.3tn (3.7% of GDP). Recall that the Medium-Term Economic Program (MTEP) for 2026–2028, released last week, revised the 2025 budget deficit-to-GDP ratio from 3.1% to 3.6%, while the ratio for 2026 was adjusted from 2.8% to 3.5%.

* The real effective exchange rate (REER) increased by 1.3% m/m in September, reaching 70.83. After declining for six consecutive months between February and July, the REER has inched up modestly over the past two months. Despite this recent recovery, the Turkish lira has depreciated by around 2% in real terms year-to-date against the currency basket, indicating that the overall real appreciation trend remains limited.