💸 Sharp Drop in Reserves: $27.6 Billion Erosion in CBRT's FX Position
The CBRT's reserves released yesterday show that gross reserves fell by $8 billion during the week of March 21. FX reserves decreased by $8.7 billion while gold reserves increased by $773 million.
Net reserves—calculated by subtracting total liabilities from the CBRT's total assets—fell from $66.4 billion to $54.6 billion. After deducting the $10 billion in swaps with banks and adding $9.8 billion from reverse swaps, the CBRT’s net FX position is calculated at $54.5 billion from $66.4 billion.
(Note: We do not include non-deliverable forwards (NDFs) in this calculation, as NDFs are contracts where parties agree to exchange foreign currency at a predetermined rate at a future date, but no actual delivery of FX occurs—only the TL equivalent of the difference is settled.)
The $14.5 billion drop in the CBRT’s net position compared to the previous week reflects the FX demand during that period.
👉 Weekly Change in FX Position (as of March 21):
Change in gross reserves: -$8.0 billion
Change in net reserves: -$11.7 billion
Change in swap stock: +$1.4 billion
Change in reverse swap: -$1.4 billion
Total change: -$14.5 billion
Extending the analysis using daily balance sheet data through March 26 shows that the CBRT’s FX position dropped to $41.3 billion, marking a total decrease of $27.6 billion compared to March 14.
🏦 Signs of Liquidity Normalization?
Despite the CBRT’s intense FX interventions, excess liquidity in the system has not been drained; in fact, there was an increase in OMO (open market operations) stock from March 26 to March 27.
On March 27, the CBRT did not provide any funding via overnight or weekly repo operations, which may signal that the central bank will soon reintroduce weekly repo auctions as the main funding tool.
Additionally, the CBRT did not carry out any reverse swap operations on March 27—something it had been doing since early January—suggesting reduced FX demand in the market.
This may pave the way for a full end to reverse swaps and an increase in swap positions with banks.
👉 CBRT Funding Data as of March 27:
Total funding: 0 billion TRY
Weekly repo: 0 billion TRY
O/N repo: 0 billion TRY
Total sterilization: 650.1 billion TRY
Deposit auctions: 577.6 billion TRY
O/N quotations: 15.1 billion TRY
Liquidity bill issuance: 57.4 billion TRY
Net funding: -650.1 billion TRY (previous day: -474.5 billion TRY)
Reverse swap liquidity (borrowed TL): 0 billion TRY ($0)
NDF: $2.2 billion (TRY 83.4 billion)
Total excess liquidity (OMO + reverse swap): TRY 650.1 billion
💰 Increase in FX Demand: DTH + FX-Protected Deposits Rise by $5 Billion
According to weekly data released by the CBRT as of March 21 and daily data from BDDK, FX deposit demand increased significantly.
Residents' FX deposits (DTH) rose from $178.7 billion to $185.0 billion. The increase, adjusted for parity effects, was $5.9 billion, of which $2.65 billion came from households.
During the same week, FX-protected deposit accounts (KKM) dropped by $1.3 billion. However, the combined total of DTH + KKM rose by $5.0 billion to reach $205.7 billion.
Since the beginning of the year, DTH + KKM has grown by $10 billion suggesting an already heightened FX demand in the last few weeks.
🌍 Foreign Capital Outflow: $3.1 Billion Left in One Week
In the week of March 21, there was an outflow of $443.7 million from equities and $439.5 million from the bond market.
The combined value of equity and bond holdings dropped from $52.5 billion to $43.6 billion in one week, while the market value of sovereign and corporate eurobond holdings decreased by $1.3 billion.
The off-balance-sheet FX position (excluding CBRT) formed through bank swaps with foreigners fell by $2.2 billion to $34.3 billion.
As a result, foreign positioning through these three channels fell by $3.1 billion in the week ending March 21. Since the beginning of the year, foreign inflows amounted to $11.5 billion via swap markets, $571 million via equities, and $3.1 billion via bonds.
Foreign Portfolio Investments:
Equities and bonds: $43.6 billion ($8.9 billion)
Sovereign and corporate eurobonds: $65.8 billion (-$1.3 billion)
Off-balance-sheet FX position (ex-CBRT): $34.3 billion (-$2.2 billion)
📊 Loan and Deposit Rates: Acceleration in Private Banks, Deceleration in Public Banks
The impact of the CBRT’s hike in overnight lending rates is only partially reflected in deposit rates as of March 21.
Average 1-month deposit rate rose from 48.0% to 48.5%
3-month deposit rate increased from 49.9% to 50.0%
However, loan rates seem to have risen more rapidly:
Personal loan rates rose from 62.7% to 63.7%
Commercial loan rates increased from 50.3% to 51.3%
As expected with rising loan rates, credit growth in public banks slowed visibly, while private banks saw an acceleration.
This contrast—at odds with inflation dynamics—may deepen further if current volatility subsides.
💳Loan and Deposit Rate Changes:
1-month deposit: 48.5% (previous week: 48%)
3-month deposit: 50.0% (previous week: 49.91%)
Personal loan (excluding overdrafts and credit cards): 63.74% (previous: 62.73%)
TL Commercial loan (excluding overdrafts and credit cards): 51.27% (previous: 50.32%)
📈Credit Growth (Annualized 13-week moving average of weekly changes):
Public Banks:
Total: 35.3% (previous: 38.9%)
Consumer: 45.3% (previous: 51.5%)
Commercial: 32.7% (previous: 35.9%)
Private Banks:
Total: 32.2% (previous: 30.9%)
Consumer: 39.1% (previous: 36.8%)
Commercial: 33.5% (previous: 32.7%)
📉 Calm Decline in Markets: BIST and TRY Weaken, Yield Curve Steepens
Domestic markets showed a slightly negative trend on March 27:
BIST 100: Down 0.38% to 9612.8
USD/TRY: Up 0.01% to 37.967
Bond Yields:
2-year: 43.63% → 45.20% (increase)
5-year: 37.86% → 37.78% (decrease)
Rising short-term rates signal the CBRT’s continued tight stance.
🇺🇸 Caution in U.S. Markets: Auto Tariffs Increase Uncertainty
Despite relatively low activity on March 27, tariff-related headlines continued to affect U.S. market pricing:
S&P 500: ↓ 0.3%
Dow Jones: ↓ 0.4%
Nasdaq: ↓ 0.5%
Bond Yields:
2-Year: 3.996%
10-Year: 4.346%
U.S. Dollar Index (DXY): 104.35
⚖️ Worsening Trade Balance: Gold and Energy Imports on the Rise
In February, the foreign trade deficit rose by 14.8% year-over-year to $7.8 billion. The increase was driven by a 1.6% drop in exports to $20.8 billion and a 2.4% rise in imports to $28.5 billion.
The 12-month rolling trade deficit increased from $83.6 billion to $84.6 billion. Excluding gold and energy, the deficit narrowed slightly from $20.8 billion to $20.6 billion. Energy imports rose 5.7% to $6.1 billion due to higher natural gas prices, while gold imports surged 90.4% to $2.1 billion (compared to 43.7% the previous month).
Despite rising gold imports, consumer goods imports shrank 0.8%, and durable goods imports dropped 11.8%—suggesting the import increase is not broad-based. If gold prices continue to rise and export opportunities remain limited due to tariffs, the trade balance could deteriorate further.
🧑💼 Labor Market Fragility: Underemployment Rises
In February, the seasonally adjusted unemployment rate declined from 8.4% to 8.2%, largely due to individuals shifting from "unemployed" to "potential labor force" status.
Among the 15–24 age group, the unemployment rate rose 0.1 points to 15.0%.
The broader underemployment rate increased from 28.2% to 28.4%. Though the number of unemployed declined by 95K and time-related underemployment fell by 96K, the potential labor force grew by 357K, resulting in a net rise of 166K in underemployment. While the labor force declined by 244K, the increase in the potential labor force indicates continued fragility in the labor market.