GLOBAL MARKETS
A New Front Opens in the Trade Wars!
The European Commission has taken action against the new tariffs imposed by the US on steel and aluminum imported. In retaliation, the EU is preparing to impose taxes on American whiskey and reinstate the "balancing measures" that were suspended in 2018. In response, US President Donald Trump issued a strong warning: a 200% tariff threat on wine, cognac, and other alcoholic beverages imported from Europe! The 50% tariff proposed by the European Commission could deal a major blow to the American bourbon industry, which accounted for 40% of total liquor exports in 2023. Meanwhile, according to Eurostat, the US represents 31% of Europe's wine and liquor exports. With trade wars intensifying, major losses could be on the horizon for this industry!
The tension is not limited to just these two parties. In Canada, some retailers have removed American whiskey from their shelves due to Trump's harsh rhetoric toward the country and even his threat of annexation.
Stock markets continued to react negatively to these developments. The S&P 500 closed down 1.4%, the Dow Jones fell 1.3%, and the Nasdaq ended the day with a 2.0% loss.
Among U.S. Treasury yields, the 2-year and 10-year yields slightly declined compared to the previous day, settling at 3.965% and 4.289%, respectively.
The DXY remained largely unchanged at 103.9, while EUR/USD continued trading around 1.085, as no new updates emerged regarding Germany's fiscal spending plans.
New Records Ahead for Gold?
The tide is turning in the gold market! Last year, the Federal Reserve’s reluctance to cut interest rates kept gold prices in check, but as rate cuts began, gold broke free from its chains and soared from $2,024 at the end of 2023 to $2,609 by the end of 2024—a staggering 30% increase!
However, in recent weeks, caution has emerged regarding levels above $3,000. While rising inflation expectations support gold prices, US Treasuries still dominate as the primary safe haven. Yet, the game is far from over for gold! Although easing geopolitical risks may limit demand, the deepening trade wars and the need for reserve diversification continue to fuel gold's upward trend.
Short-term corrections are possible, but prices surpassing $3,000 may soon become a lasting reality!
DOMESTIC MARKET
Strong Recovery in Reserves
The Central Bank of Turkey (CBRT) has regained lost ground in reserves! In the week of March 7, gross reserves increased by $4.5 billion, reaching $169.9 billion. Nearly all of the previous week's $4.6 billion loss was recovered, with gold reserves rising by $1.4 billion to $70.7 billion and foreign exchange reserves increasing by $3.0 billion to $97.8 billion.
Even more striking is the sharp rise in net reserves! After deducting total liabilities from total assets, net reserves surged from $59 billion to $65 billion, while net reserves including Treasury deposits reached $74 billion. Additionally, the CBRT's net foreign exchange position, including swap agreements with banks, climbed from $51.5 billion to $57.1 billion.
Is this recovery sustainable? While fluctuations in capital flows continue to support reserves, exchange rate volatility and KKM (FX-protected deposit scheme) unwinding are adding pressure for dollarization. In the coming period, capital inflows and the trajectory of FX deposits will reveal how aggressively the CBRT will manage its reserves!
Weak Foreign Inflows: A Volatile Capital Flow!
During the week of March 7, foreign investors were net buyers in the stock market but net sellers in bonds!
Stock market inflows totaled $216.3 million,
Bond market saw an outflow of $159.3 million.
Over the past four weeks, bond inflows reached $1.9 billion, keeping the foreign share above 10%. Additionally, $1.3 billion entered via swap markets, bringing the four-week swap inflow total to $1.9 billion.
Since the beginning of the year:
Foreign stock positions have increased by $438.7 million,
Bond holdings have grown by $2.0 billion,
Swap positions have surged by $12.0 billion.
On a 52-week rolling basis, total foreign capital inflows amount to $51.2 billion, with $18 billion from bond purchases and $36.4 billion from swaps.
Looking at the long-term trend, while foreign interest remains limited, bond and swap markets still maintain their appeal! However, uncertainty in global interest rates and geopolitical risks could test the sustainability of these capital inflows!
Decline in FX Deposits: Where Is Dollarization Headed?
While capital inflows continue to support reserves, exchange rate fluctuations and KKM unwinding sustain strong FX demand!
Domestic residents’ FX deposits increased by $5.6 billion to $177.1 billion, but when adjusted for exchange rate effects, the actual rise was $2.5 billion.
Corporations are visibly increasing their FX demand! Since the beginning of 2025, corporate FX deposits have risen by $5.7 billion, likely due to companies hedging against KKM redemptions.
With domestic FX deposits reaching $202.4 billion and KKM balances at $22.8 billion, the total dollarization metric now stands at $225.2 billion. This figure had dropped to $217.4 billion by the end of January but is now trending upward again.
Even if the Turkish lira continues appreciating in real terms, the recent surge in FX demand raises questions about whether the exchange rate movement will revive dollarization pressures!
Diverging Trends in Loans: Consumer Credit Slows, Commercial Lending Accelerates!
In the week of March 7, deposit rates fell while commercial loan growth gained momentum!
3-month TL deposit rates declined from 52% to 51.44%,
The weighted average TL deposit rate fell below 50% to 49.18%.
A closer look at loan rates shows:
Consumer loan rates dropped from 64.76% to 64.12%,
Mortgage rates remained steady at 39.85%,
Auto loan rates spiked from 36.8% to 42.8%!
Commercial loans tell a different story!
Commercial loan rates climbed back above 50%, reaching 50.4%.
Public banks accelerated commercial lending growth from 33.5% to 38%, while private banks saw a smaller increase from 30.3% to 31.2%.
While consumer loans are slowing, the acceleration in commercial lending suggests a policy shift favoring investment and business growth. If interest rate cuts continue, commercial lending could expand even further!
Housing Market Loses Momentum
February housing sales data indicate a slowdown in market momentum!
In January, home sales surged by 39.7%,
In February, this growth slowed to 20.1%, reaching 112,818 units.
This marks the slowest annual growth rate in five months!
Mortgage-backed sales remain strong but are also losing steam!
In January, triple-digit growth rates were recorded,
In February, mortgage-backed sales increased by 90.1% to 16,778 units.
New home sales rose by 18.2% to 33,784, while second-hand home sales climbed by 21% to 79,034.
One of the most striking developments is the sharp decline in foreign home purchases!
Foreign sales dropped by 21.1% to 1,457 units in February,
Continuing the negative trend observed since July 2022,
The foreign share of total home sales has fallen to 1.50%!
What’s next for housing prices? With mortgage rates hovering around 40%, potential CBRT rate cuts could lower borrowing costs. However, this may prevent price corrections, causing the housing market stagnation to persist for a while longer!