Short-Term Bond Yields Decline with Central Bank Steps
The CBRT's return to repo auctions pulled down short-term benchmark bond yields while significantly reviving investor demand for these maturities.
The Central Bank of the Republic of Turkey's resumption of one-week repo auctions led to a decline in short-term benchmark bond yields while directing market appetite toward short-term securities.
Market Impact of Repo Auctions
The Central Bank of the Republic of Turkey's reopening of 1-week repo auctions, which had been suspended since March 1, had a positive reflection on short-term benchmark bond yields. Following the decision, a decline of nearly 1 percentage point was recorded in 2-year and 5-year benchmark bond yields.
As a result of the transactions, the 2-year benchmark bond yield fell below the 40 percent threshold for the first time since July 3. No significant change was observed in the 10-year benchmark bond yield.
Interest Rates and Expectations
Experts stated that due to the 2-percentage-point upward revision in year-end inflation and high inflation expectations, demand for short-term bonds will continue, but investors will remain hesitant regarding long-term ones.
With the CBRT starting weekly repo auctions, excess liquidity was generated in the market. The market interest rate, TLREF, declined to 36.93 percent for the first time since March 2.
Deposit and Loan Interest Rates
In addition to the direct impact of this step on money market interest rates, it is expected to be rapidly reflected in TL deposit rates. Its impact on loan interest rates is projected to take about 1 week.
Treasury Borrowing Data
The Treasury, which announced its domestic borrowing target for August as 536.7 billion liras, had planned for 334.7 billion liras of this amount to be raised through market auctions and 165 billion liras through direct sales. In terms of actual realizations, 348.5 billion liras was borrowed from the market through auctions.
Cash Reserve Strengthening Move
While direct sales realized as 236.1 billion liras, the Treasury, excluding sales to the public, exceeded its target by borrowing 584.5 billion liras in August. The main reason for this was gold and foreign currency-denominated direct sales.