Negative interest, record demand for zero coupons


The banking sector continues its record interest in Treasury CPI bond auctions. During the bond auction organized yesterday by the Ministry of Treasury and Finance, a net sale of 7 billion 608 million liras was achieved. With the sale of non-competitive bids made to market makers before the bidding, Treasury sales reached 12 billion 608 million lira yesterday. For the third time in the history of the Treasury, demand reached 30 billion lira, while borrowing with zero coupon payments every 6 months and with negative interest as seen in indexed bond auctions the CPI from December 2021.

The banking sector achieved an exceptional performance in terms of net profit in the first quarter. One of the main reasons for this is that they have increased their stocks of CPI-indexed bonds. It is estimated that almost half of the net profit of the banking sector in the first quarter of 2022, which shows great interest in all auctions, comes from this bond stock. According to the reports prepared by the research institutes of the banks whose shares are traded on the stock exchange, there will be an increase of more than 200% in their net profits in the first quarter.

Banks’ demand for CPI-linked bonds continued similarly yesterday. Net sales of TL 7.607.7 million were made in the reissue of CPI-linked government bonds with the redemption date of the Ministry of Treasury and Finance on February 11, 2032. In the call offers; nominal supply was 13 billion 237.2 million, nominal sales were 5 billion 120.7 million TL, the average minimum price was 146,823 TL, the average price was 148,569 TL, the rate of actual simple interest was negative 2.37%, actual compound interest was negative 2.35%. The Treasury sold TL 5 billion net to market makers before the auction. The sale to the public did not take place. The net amount of supply from primary dealer banks was TL 16.54.8 million.

Inflation topped 61% in March and continued to rise in the coming months, along with deteriorating expectations fueling banking sector interest in CPI-linked bond auctions. The banking sector also manages to obtain a significant return on this item. According to information provided by banking sources, the government’s steps were not slow despite such a good performance of the banking sector. The Central Bank’s reduction of the reserve requirement rate in Turkish lira deposits to zero will take 5-6% of the profits of the banking sector in 2022. In addition, the corporate tax rate in the banking sector has also been raised. at 25%. However, despite all this, the banking sector is expected to have a strong and successful 2022.

In contrast, the stock of TL floating rate and CPI-linked bonds in the stock of Treasury debt continues to rise. According to data from the Ministry of Treasury and Finance, as of February, 311 billion 726 million liras of outstanding central government domestic debt is indexed to the CPI. 214 billion TL 540 million consists of floating rate notes of TL. The stock of fixed-rate TL bonds amounts to 458 billion 845 million lire. The share of fixed interest bonds in TL in the total stock of domestic and external debt of 2 trillion 947 billion 962 million TL is at the level of 15.5%. When the stock of currencies is taken into account, the share of TL floating rate and CPI-indexed bonds amounts to 84.5%.

21.5 billion lira sold to market makers

The Ministry of Treasury and Finance held 5 CPI-indexed bond auctions this year, in addition to yesterday’s. For the first time during the February 23 auction, the Treasury determined the zero coupon payment every 6 months due to high demand. Previously, the coupon payment was determined at the 1.45% and 0.75% levels. According to data from the Ministry of Treasury and Finance, 500 million liras were sold to the public in these tenders, while 21.5 billion liras were sold to market makers in the tender. yesterday’s offers. The highest negative interest rate was minus 6.03% in the February 16 auction, while negative compound interest was achieved in all auctions.

The share of the banking sector is 73.5%

According to data from the Ministry of Treasury and Finance, 73.5% of holders of outstanding central government domestic debt belong to the banking sector. This rate stood at 50.5% at the end of 2012. At the end of 2012, the share of foreigners in the outstanding domestic debt was 23.2%, while it fell to 2 .2% in February 2022. According to the data, in February 2022, public banks held 37.8% of outstanding domestic debt, private banks 20.1% and foreign banks 9%. The share of the non-banking sector amounts to 19.8%. Again, this share was at 24.4% at the end of 2012.

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