Macro and Politics

* The Treasury will hold 10m G-bond and 5y CPI-indexed bound auctions today. According to the domestic borrowing strategy for the March – May 2026 period, the Treasury plans to borrow a total of TL315.5bn from the domestic market in March against redemptions of TL394.3bn, implying a rollover ratio of approximately 80%. Having already borrowed below the redemption amount in February, the Treasury appears set to maintain a similar strategy in March and April, targeting domestic borrowing below redemption amounts. Following last week’s direct sale of a 1y euro-denominated bond, through which the Treasury raised TL47bn, the remaining borrowing space for the rest of the month stands at roughly TL270bn under the current domestic borrowing projections. After today’s double auctions, the Treasury will continue its March funding program with two fixed-coupon bond auctions with maturities of 5y and 8y on 16 March, followed on 17 March by auctions of a 2y fixed coupon bond and a 4yr TLREF-indexed bond, alongside direct sales of a 2y gold-denominated bond and a gold-denominated lease certificate, thereby completing its March domestic borrowing schedule.

* TURKSTAT will release January Industrial Production (IP) figures today @ 10:00 local time. The sequential (the seasonally and calendar adjusted monthly figure) industrial production (IP) increased by 1.2% m/m in December, while the calendar-adjusted annual change pointed to a contraction of 2.1% y/y. Given that IP had risen by 2.5% m/m and 2.2% y/y in November, the December data indicate a marked loss of momentum in industrial activity. As per sub-categories, the annual contraction was driven primarily by high-technology manufacturing, which declined by 25% y/y, alongside sharp contractions in wearing apparel manufacturing (-29.2% y/y), metal ore mining (-23.4% y/y), and other transport equipment manufacturing, which includes defense-related products (-9.2% y/y). Notably, the declines observed in high-technology and other transport equipment mark a return to negative annual growth after several months, underscoring the breadth of the slowdown. Accordingly, IP recorded annual growth of 0.8% in the final quarter of 2025, while calendar-adjusted annual growth stood at 0.6%. On a quarterly basis, IP increased by a modest 0.1% q/q, pointing to a flattish sequential performance. By comparison, in the third quarter, IP had expanded by 5.2% y/y (calendar-adjusted: 5% y/y), while contracting by 0.6% q/q.  Following the 3.6% growth recorded in 2025, we project the economy to expand by 4% in 2026.

* Our calculations based on the CBT’s analytical balance sheet suggest that gross FX reserves fell by USD12.7bn in the week of 27 February – 6 March, bringing the total down to USD197.7bn. Amid a pronounced deterioration in risk appetite toward emerging markets following the escalation of US–Iran tensions, we estimate that the CBT’s net FX position also declined by USD13.7bn over the same period, reflecting efforts to contain potential depreciation pressures on the Turkish lira. The CBT is scheduled to release its official reserve data on Thursday at 14:30. We expect the official figures to confirm a reserve decline broadly in line with our calculations.