Macro and Politics

*The Ministry of Treasury and Finance will hold 4y TLREF-indexed and 10y fixed-coupon bond auctions today. In yesterday’s auctions, covering a 2y fixed-coupon bond and a 5y CPI-linked bond, the Treasury raised TL78.3bn, including non-competitive sales. Demand at the 2y fixed-coupon auction was robust, with a bid-to-cover ratio of 3.09x, while the average compounded yield settled at 36.87%. Despite a relatively modest net sale amount of TL650mn at the CPI-linked auction, demand remained exceptionally strong, reflected in a bid-to-cover ratio of 10.94x. The real compounded yield at this auction was set at 5.3%. With yesterday’s auctions, the Treasury’s total domestic borrowing for January reached TL246.2bn. Following today’s dual auctions, the January domestic borrowing program will be completed on January 26, with direct sales of a 1y gold-denominated bond and a 1y gold-denominated lease certificate. According to the Treasury’s Jan–Mar 2026 domestic borrowing strategy, total redemptions of TL613.3bn scheduled for January are set to be met through three direct sales and seven auctions, with planned domestic borrowing amounting to TL487.7bn, implying a targeted rollover ratio of 80%. Having already raised TL246.2bn from domestic markets so far this month, the Treasury is likely to borrow around TL240bn via today’s auctions and the direct sales scheduled for next week.

*The CBT will release November Balance of Payment figures today @10:00 local time. We expect the current account balance to revert to a deficit in the final two months of 2025, following four consecutive months of surplus. Hence, we forecast a USD2.8bn current account deficit in November, mainly on the back of seasonally weaker travel revenues and a widening trade deficit. Accordingly, we expect the 12-month rolling current account deficit to remain broadly flat at around USD22bn as of November. For 2025, we project the current account deficit to close at approximately USD20bn, corresponding to 1.3% of GDP. Our 2026 year-end current account deficit forecast stands at USD25bn (1.5% of GDP). Looking ahead to 2026, we assess upside risks to the current account balance stemming from the recent upward trend in gold imports and the persistence of elevated consumer goods imports. That said, we assume these pressures will be partially offset by an improving external demand outlook and the relatively subdued volatility in energy prices that we anticipate. Within this framework, the CAD/GDP ratio remaining well below its historical averages continues to serve as a key anchor, helping keep external financing needs manageable and macroeconomic vulnerabilities contained.