Macro and Politics

* The Treasury will hold 2y and 5y fixed-coupon bond auctions today. The Treasury tapped the domestic markets at an amount of TL34.1bn (including non-competitive sales) via yesterday’s 7m G-bond auction. The bid-to-cover ratio stood high at 2.94x, while the average cost of borrowing was 41.13%. According to the Treasury’s three-month domestic borrowing program covering the period of November 2025 – January 2026, it plans to borrow a total of TL128.3bn from domestic markets against its redemption of TL95bn this month, implying a rollover ratio of 135%. After this week’s auctions, the Treasury will hold a direct sale of a two-year TLREFK-indexed lease certificate on November 18 and will complete the month’s borrowing program with the direct sales of a 2y USD-denominated bond and a 2y USD-denominated lease certificate on November 20.

* The sequential (the seasonally and calendar adjusted monthly figure) IP rose contracted by 2.2% m/m, while calendar-adjusted IP increased by 2.9% y/y in September, in parallel with our house estimates. Please recall that the sequential IP rose by 0.4%, while calendar-adjusted IP increased by 7.1% y/y back in August. Accordingly, the IP declined by 0.6% q/q in the third quarter, while remaining broadly flat on an annual basis. The strong annual growth observed in the second quarter, largely driven by a favorable base effect, has given way to a more stagnant performance as the base effect has faded. We expect to see a similar dynamic reflected in the upcoming third-quarter GDP figures. The loss of momentum in defense-related production, which had been one of the main drivers of IP growth in the second quarter, appears to have played a role in the monthly contraction and limited the annual increase in September. Overall, we continue to observe divergence across sectors, as the annual gains remain unevenly distributed and even the leading sectors behind the earlier growth have started to show signs of weakening. In line with these developments and the signals from leading indicators, we expect the underlying trend in real sector activity to remain subdued. Our year-end 2025 growth forecast stands at 3.4%.