Macro and Politics

*The Treasury and Finance Ministry will hold a 10-month zero-coupon and a 5-year fixed-coupon bond auctions today. According to the domestic borrowing strategy for the three-month period covering May–July 2026, the Treasury plans to conduct TL381.7bn in domestic borrowing against TL347bn in redemptions in May, implying a rollover ratio of 110%. Following today’s auctions, the issuance calendar indicates that the Treasury will hold auctions of 2-year fixed-coupon and 4-year CPI-linked bonds on May 11. On May 12, this will be followed by an auction of a 4-year TLREF-indexed bond, along with direct sales of a 2-year USD-denominated bond and a USD-denominated lease certificate of the same maturity. On May 18, the Treasury will conduct direct sales of a 1.5-year gold-denominated bond and a gold-denominated lease certificate, thereby completing its domestic borrowing program for May.

*The CBT will release April Real Effective Exchange Rate (REER) today @14:30 local time. Considering the inflation realizations and the average Basket/TRY change for April, we expect the REER to increase to 106.85, implying a 2.1% real appreciation of the Turkish lira.

* TURKSTAT will release April seasonally adjusted CPI aggregates today @16:00 local time. Based on our calculations, we estimate that seasonally adjusted (SA) monthly CPI inflation came in around 3.5% in April.

* The CBT will release the Monthly Price Developments report for April today @18:00 local time. The report is a technical one and does not contain a policy message. Still, the assessment of trend core inflation will be monitored closely.

* April CPI came in at 4.2% m/m, well above our house forecast and the market median of 3.3%, pushing annual inflation up to 32.4% from 30.9% - the highest level since October. The upside surprise was mainly driven by rising energy costs and a sharp acceleration in food prices, while PPI increased by 3.2% m/m, bringing annual producer inflation to 28.6%. Food prices rose by 8.9% m/m, emerging as the main driver of the deviation from our forecast, while we estimate that the 25% hike in electricity and natural gas tariffs added around 0.6pp to headline inflation. Housing recorded the second-highest monthly increase at 8.0%. A breakdown of food components shows that unprocessed food inflation accelerated to 4.2% m/m (from 3.2%), largely driven by fresh fruit and vegetable prices, while processed food inflation picked up to 3.3% (from 0.6%). Core goods prices increased by 4.2% m/m, while services inflation accelerated to 3.0% m/m, with the annual rate broadly stable at 40.3%. Core indicators also pointed to a loss of momentum in the disinflation process, with CPI-B and CPI-C rising to 3.4% and 3.5% m/m, respectively. We observe a notable moderation in food prices as of mid-April, which could feed into May data and help slow the pace of inflation. We maintain our year-end 2026 CPI forecast at 28%, while noting that risks remain skewed to the upside. We expect the CBT to revise both its 15%–21% forecast range and its 16% mid-point target upward in the May 14 Inflation Report.

* The Istanbul Chamber of Industry (ICI) Türkiye Manufacturing PMI declined from 47.9 to 45.7 in April, marking its lowest level since October 2024. With the index remaining below the 50 threshold, the ongoing slowdown in manufacturing activity extended into its 25th consecutive month. The accompanying note highlighted that the impact of the Middle East conflict became more pronounced, with rising input costs, supply disruptions, and weakening demand weighing on production and new orders, while intensifying price pressures and lengthening supplier delivery times. Firms continued to scale back employment, purchasing activity, and inventories, with input stocks falling at the fastest pace in six years. The sectoral breakdown showed that only the wearing apparel and leather products sector recorded an increase in both output and new orders, pointing to a broad-based weakening across manufacturing. Meanwhile, the Bloomberg HT Consumer Confidence Index rose by 4.7% m/m to 71.3 in April, with both expectations and consumption tendency indices posting notable gains. We have revised our 2026 year-end growth forecast down to 3.2% from 4.0% amid the adverse effects of the US–Iran conflict. The PMI outlook suggests that weakness in manufacturing is likely to persist into Q2, while elevated cost pressures and soft external demand continue to pose downside risks to growth. Although consumer confidence improved in April, the extent to which this will translate into stronger domestic demand remains uncertain, and we maintain that risks to the growth outlook are skewed to the downside.

*The Treasury and Finance Ministry will hold a 10-month zero-coupon and a 5-year fixed-coupon bond auctions today. According to the domestic borrowing strategy for the three-month period covering May–July 2026, the Treasury plans to conduct TL381.7bn in domestic borrowing against TL347bn in redemptions in May, implying a rollover ratio of 110%. Following today’s auctions, the issuance calendar indicates that the Treasury will hold auctions of 2-year fixed-coupon and 4-year CPI-linked bonds on May 11. On May 12, this will be followed by an auction of a 4-year TLREF-indexed bond, along with direct sales of a 2-year USD-denominated bond and a USD-denominated lease certificate of the same maturity. On May 18, the Treasury will conduct direct sales of a 1.5-year gold-denominated bond and a gold-denominated lease certificate, thereby completing its domestic borrowing program for May.

*The CBT will release April Real Effective Exchange Rate (REER) today @14:30 local time. Considering the inflation realizations and the average Basket/TRY change for April, we expect the REER to increase to 106.85, implying a 2.1% real appreciation of the Turkish lira.

* TURKSTAT will release April seasonally adjusted CPI aggregates today @16:00 local time. Based on our calculations, we estimate that seasonally adjusted (SA) monthly CPI inflation came in around 3.5% in April.

* The CBT will release the Monthly Price Developments report for April today @18:00 local time. The report is a technical one and does not contain a policy message. Still, the assessment of trend core inflation will be monitored closely.

* April CPI came in at 4.2% m/m, well above our house forecast and the market median of 3.3%, pushing annual inflation up to 32.4% from 30.9% - the highest level since October. The upside surprise was mainly driven by rising energy costs and a sharp acceleration in food prices, while PPI increased by 3.2% m/m, bringing annual producer inflation to 28.6%. Food prices rose by 8.9% m/m, emerging as the main driver of the deviation from our forecast, while we estimate that the 25% hike in electricity and natural gas tariffs added around 0.6pp to headline inflation. Housing recorded the second-highest monthly increase at 8.0%. A breakdown of food components shows that unprocessed food inflation accelerated to 4.2% m/m (from 3.2%), largely driven by fresh fruit and vegetable prices, while processed food inflation picked up to 3.3% (from 0.6%). Core goods prices increased by 4.2% m/m, while services inflation accelerated to 3.0% m/m, with the annual rate broadly stable at 40.3%. Core indicators also pointed to a loss of momentum in the disinflation process, with CPI-B and CPI-C rising to 3.4% and 3.5% m/m, respectively. We observe a notable moderation in food prices as of mid-April, which could feed into May data and help slow the pace of inflation. We maintain our year-end 2026 CPI forecast at 28%, while noting that risks remain skewed to the upside. We expect the CBT to revise both its 15%–21% forecast range and its 16% mid-point target upward in the May 14 Inflation Report.

* The Istanbul Chamber of Industry (ICI) Türkiye Manufacturing PMI declined from 47.9 to 45.7 in April, marking its lowest level since October 2024. With the index remaining below the 50 threshold, the ongoing slowdown in manufacturing activity extended into its 25th consecutive month. The accompanying note highlighted that the impact of the Middle East conflict became more pronounced, with rising input costs, supply disruptions, and weakening demand weighing on production and new orders, while intensifying price pressures and lengthening supplier delivery times. Firms continued to scale back employment, purchasing activity, and inventories, with input stocks falling at the fastest pace in six years. The sectoral breakdown showed that only the wearing apparel and leather products sector recorded an increase in both output and new orders, pointing to a broad-based weakening across manufacturing. Meanwhile, the Bloomberg HT Consumer Confidence Index rose by 4.7% m/m to 71.3 in April, with both expectations and consumption tendency indices posting notable gains. We have revised our 2026 year-end growth forecast down to 3.2% from 4.0% amid the adverse effects of the US–Iran conflict. The PMI outlook suggests that weakness in manufacturing is likely to persist into Q2, while elevated cost pressures and soft external demand continue to pose downside risks to growth. Although consumer confidence improved in April, the extent to which this will translate into stronger domestic demand remains uncertain, and we maintain that risks to the growth outlook are skewed to the downside.