Macro and Politics

* The Treasury tapped the domestic markets to the tune of TL29.8bn, including non-competitive sales amounting to TL20bn, via yesterday’s 5y fixed-coupon bond auction, while also sold TL13.4bn at the direct sale of 1y TLREFK-indexed lease certificate. The bid – to – cover ratio was low at 1.4x in the 5y fixed-coupon bond auction, while the average cost of borrowing stood at 37.94%. Accordingly, the Treasury finalized its domestic borrowing program for June, bringing total domestic borrowing since the beginning of the month to TL440.5bn, which is lower than the initial projection of TL543.8bn. The Treasury will release its next three-month (July – September 26’) domestic borrowing strategy on June 30^th @ 17:30 local time. According to the previous program, The Treasury has a domestic redemption of TL616.3bn in July, while in return plans to borrow TL708.7bn throughout the month, implying a rollover ratio of 115%.

* The Residential Property Price Index (RPPI) increased by 1.7% m/m and 24.5% y/y in May, reaching 227.1, while posting a 6.1% annual decline in real terms. Recall that the real annual change in the RPPI had turned positive at 0.2% in November for the first time since January 2024, before reverting back into negative territory as of December. Having maintained an annual contraction in real terms since December, the latest RPPI data indicate that residential property prices continue to lose ground against inflation. Meanwhile, the New Tenant Rent Index (NTRI) rose by 1.9% m/m and 30.4% y/y to 315.2 in May, while the annual real change pointed to a contraction of 1.6%. Accordingly, having recorded its first annual decline in real terms since January 2020 in the previous month, the NTRI extended this trend into a second consecutive month. The May data suggest that nominal price increases in the housing market continue to lag behind inflation, while the ongoing correction process in real terms remains in place. Tight financial conditions and elevated borrowing costs continue to constrain demand dynamics, while the still-high inflation environment continues to support nominal price growth. On the rental side, the persistence of real contraction in the index for a second consecutive month reinforces the view that the previously elevated momentum in rent inflation has begun to normalize gradually.