EBRU USTA/BLOOMBERG HT MONEY MARKETS MANAGER
Net sales of 1 billion 821 million TL were realized in the Turkish Treasury and Finance Ministry’s 10-year (3,612-day) CPI-indexed bond auction in TL. With the ROT sales of 1 billion 250 million TL before the tender, the total sales amount reached 3 billion 71 million TL.
The nominal amount of sales in the tender was 1 billion 85 TL. While the real simple interest rate in the auction was minus 5.0 percent on average, the real compound interest was determined as the lowest minus 5.25 percent, the average 4.94 percent, and the highest minus 4.79 percent.
The minimum price in the tender was 165,294 TL and the average price was 167,834 TL. The value date of the bond issued for the first time was determined as February 22, 2023. The bond will be repaid on January 12, 2033.
The negative interest rate in the previous CPI-indexed bond of the Treasury, which was realized on January 24, decreased to minus 2.60 percent with the decline in inflation, after the levels of minus 3 percent in the last months of last year.
In the tender held last month, in the first issuance of the 10-year CPI-indexed government bond with 0.00% real coupon payment every 6 months, a net sales of 1.48 billion liras was achieved against the 5.99 billion lira offer.
The Ministry of Treasury and Finance sold 700 million TL against the 4.42 billion TL bid from market makers before the tender for the 10-year CPI-indexed bond. The bond was not sold to the public.
Inflation, which was 36.1 percent annually at the end of 2021, started 2022 with 48.7 percent on an annual basis and reached its peak level with 85.5 percent in October during the year.
While inflationary pressures continued throughout the year, the headline CPI decreased to 64.3 percent at the end of 2022 due to the base effect. With the rising inflation in 2022, the increase in the incomes of the banks from the CPI-indexed bonds has been the most important item contributing to the increase in profits in the last year. In 2022, the net profit of the sector increased by 366 percent compared to the previous year and reached 433.5 billion TL. had reached.
According to TUIK data, although the CPI decreased from 64.3 percent to 57.7 percent in January 2023, the market’s inflation expectations increased. According to the CBRT’s February Market Participants Survey, the year-end CPI increase expectation was 35.76 percent. Year-end inflation expectation was 32.46 percent in the January survey.
In January, Turkstat’s monthly inflation was higher than expected and expectations that post-earthquake expansionary fiscal and credit policies would be implemented push inflation expectations up.
In its report published last week, JP Morgan revised its year-end inflation forecast from 43 percent to 45 percent due to rising food prices and increased financial support in Turkey.