Macro and Politics

* The Treasury will hold auctions of 5y and 8y fixed-coupon bonds as well as a direct sale of a 2y lease certificate today and finalize its domestic borrowing program for September. The Treasury tapped the domestic markets to the tune of TL144bn, including TL60.7bn through non-competitive sales, in yesterday’s auctions of a 2y fixed-coupon bond (new benchmark bond) and a 4y TLREF-indexed bond. Demand at the 2y fixed-coupon bond auction was relatively weak, with a bid-to-cover ratio of 1.84x, while the average compound yield stood at 39.98%. The 2y bond maturing on September 13, 2028, which was issued for the first time yesterday, will become Turkey’s new 2y benchmark government bond. Demand at the 4y TLREF-indexed bond auction was relatively strong, with a bid-to-cover ratio of 2.28x, while the periodic rate stood at 18.64%. Under its September–November 2026 domestic borrowing strategy, the Treasury plans to raise TL281.9bn from the domestic market in September against TL296.7bn of redemptions. Accordingly, the Treasury could borrow around TL138bn through today’s auctions and direct sale.

* The Treasury and Finance Ministry will release August central government budget figures @ 11:00 local time. The Treasury cash balance posted a surplus of TL49.8bn in August, while the primary cash balance recorded a surplus of TL209.6bn. The Treasury cash balance provides an early indication of the August central government budget figures, due to be released on September 15. As a reminder, the central government budget had posted a TL114.2bn surplus in June, largely driven by base effects stemming from deferred tax collections and temporary tax payments, before swinging back into a TL378.1bn deficit in July as these effects faded and budget expenditures rose sharply. The return of the Treasury cash balance to surplus in August points to a marked improvement in the central government budget balance compared with July. We forecast the 2026 year-end budget deficit at TL2.8tn, equivalent to 3.3% of GDP.