Macro and Politics

* The Treasury will hold 2y and 5y fixed coupon bond auctions today and finalize its domestic borrowing program for the month. According to the domestic borrowing strategy for the 3-month period covering April – June 2026, the Treasury plans to conduct TL480.1bn in domestic borrowing against TL505.4bn in redemptions in April, implying a rollover ratio of 95%. Having already raised TL351.3bn since the beginning of the month, the Treasury is likely to borrow approximately TL130bn through today’s auctions.

*The CBT will release the April Real Sector Confidence Index and Capacity Utilization Rate @ 10:00 local time today. The unadjusted real sector confidence index (RSCI) declined by 3.1 points to 101 in March, marking the sharpest monthly drop since November 2023. The seasonally adjusted index fell more markedly by 4.1 points to 100. Diffusion indices indicate that all sub-components of the index—covering expected output over the next three months, general business conditions, orders, investment, export orders, inventories and employment—contributed negatively. Assessments for the past three months point to a more pronounced deterioration in production and order indicators, with the weakness in domestic demand becoming increasingly evident. Forward-looking indicators also signal a broad-based loss of momentum, with expectations for output, orders, employment and investment weakening compared to the previous month. Capacity Utilization Rate (CUR) corroborates this picture, easing to 73.3% in March from 73.5%, while the seasonally adjusted rate remained flat at 74%. In line with our expectations, we assess that the US – Iran conflict has weighed on real sector confidence regarding economic activity. Please recall that we have recently revised our growth forecast for this year down to 3.2% from 4.0%, reflecting the anticipated drag on economic activity from the global supply shock and the tightening in domestic financial conditions. We continue to see downside risks to the growth outlook.