Macro and Politics

* The Treasury tapped the domestic markets to the tune of TL67.8bn including non-competitive sales amounting to TL42bn via yesterday’s 2y fixed coupon bond and a 4yr TLREF-indexed bond auctions. Demand was strong in the fixed-coupon auction, with a bid-to-cover ratio of 3.09x, while the average compounded yield came in at 39.99%. Demand also remained robust in the TLREF-inxeded bond auction, where the bid-to-cover ratio reached 4.91x, while the term rate was set at 19.25%. The Treasury also conducted direct sales of 2-year gold-denominated bonds and gold-backed lease certificates yesterday, raising a total of TL127.4bn. Accordingly, the Treasury finalized its domestic borrowing program for February, bringing total domestic borrowing since the beginning of the month to TL314.6bn, which is broadly in line with the initial projection of TL315.5bn. The Treasury will release its next three-month (April – June 26’) domestic borrowing strategy on March 31^st @ 17:30 local time. According to the previous program, The Treasury has a domestic redemption of TL515.4bn in April, while in return plans to borrow TL463.9bn throughout the month, implying a rollover ratio of 90%.

* The Residential Property Price Index (RPPI) increased by 1.8% m/m and 26.4% y/y in February, reaching 215.5, while recording a 3.9% y/y decline in real terms. It’s worth noting that the annual real change in the RPPI had briefly turned positive in November at 0.2%, marking the first positive reading since January 2024, before slipping back into negative territory as of December. Against this backdrop, the February data indicate that housing prices continue to lose value in real terms amid elevated inflation. Meanwhile, the New Tenant Rent Index (NTRI) rose by 1.6% m/m and 34.2% y/y in February, reaching 298.3, corresponding to a 2% y/y increase in real terms. This divergence suggests that price pressures remain firm in the rental market despite the ongoing real weakening in house prices. Accordingly, rent inflation is likely to accompany the headline disinflation process with a more pronounced lag and greater persistence.