Macro and Politics

* The Treasury will hold 5y and 8y fixed-coupon bond auctions today. After today’s double auctions, the Treasury will hold 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 tomorrow and finalize its domestic borrowing program for March. According to the March – May 2026 domestic borrowing strategy, 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 raised TL92.6bn since the beginning of the month, the Treasury is likely to borrow roughly TL223bn through this week’s auctions and direct sales.

* The Treasury and Finance Ministry will release February central government budget figures @ 11:00 local time. The Treasury posted a cash deficit of TL92.4bn in February, while the primary balance recorded a surplus of TL90.9bn. As a result, the cumulative cash deficit in the first two months of the year reached TL338.7bn. The February Treasury cash balance figures serve as a leading indicator for today’s central government budget data. We currently forecast the 2026 budget deficit at TL2.8tn (3.4% of GDP), although we see upside risks to this projection. The 75% échelle mobile mechanism introduced last week is likely to weigh on SCT revenues in the coming months, thereby posing downside risks to Treasury cash revenues.

* The CBT released the March 2026 Survey of Market Participants. Respondents revised their year-end 2026 CPI inflation expectation upward to 25.4% from 24.1%, while the 2027 year-end inflation forecast increased slightly to 18.7% from 18.4%. Expectations for CPI inflation 12 months ahead edged up to 22.2% from 22.1%, while the 24-month-ahead forecast rose to 17.3% from 17.1%. Meanwhile, the five-year-ahead annual inflation expectation increased modestly to 11.6% from 11.4%. Participants expect monthly CPI inflation to come in at 2.2% in March, followed by 2.1% in April and 1.5% in May. The prices we have compiled so far point to a monthly inflation rate of around 1.9% in March, corresponding to annual inflation of approximately 30.8%. Survey participants also expect the Monetary Policy Committee (MPC) to lower the policy rate by 60 basis points to 36.4% at its 22 April meeting. For the 11 June meeting, respondents project the policy rate at 35.3%. Meanwhile, the year-end 2026 policy rate expectation has been revised upward to 30.6% from 29%. As the survey participation period closed on Wednesday, we would like to note that the MPC meeting held yesterday is not reflected in the survey results. Moreover, respondents’ year-end 2026 USD/TRY expectation declined marginally to 51 from 51.1. Our house forecast of USD/TRY 51 for end-2026 remains broadly aligned with the market consensus. On the growth and external balance front, respondents expect GDP growth of 3.8% in 2026 and 4.3% in 2027. Our 2026 growth forecast stands at 4%, though the US–Iran tensions pose downside risks to this outlook. Meanwhile, survey participants expect the current account deficit to reach USD31.6bn in 2026 and USD32.3bn in 2027. We recently revised our 2026 year-end current account deficit forecast to USD36bn (2.1% of GDP). Nevertheless, we note that upside risks to our forecast remain in place.