Demand for the Treasury's benchmark bond (2-year fixed coupon) and the 10-year fixed coupon bond auctions was muted. At the non-competitive sales, the bid-to- cover ratios were low at 1.3x and 2.0x and at the auction, these ratios came in at similar levels (1.4x and 1.9x). The Treasury raised a sum of TRY 3.9bn from the market through today's auctions. Although the amount sold was enough to meet the Treasury's market borrowing target for the month, interest rates for the benchmark bond and the 10-year bond were settled at 6.17% and 7.23%, which were even higher than the secondary market trading. Regarding the whole month, the Treasury's market roll-over ratio reached 87.8% vs. the planned 84.5%, while the total debt roll-over ratio remained lower at 84.9% vs. the planned 87.5%, as the Treasury did not fulfill the planned sales to the public institutions. The Treasury's next loaded redemptions will be held on April 3 (TRY 6.8bn) and April 10 (TRY 8.6bn), while in preparation the Treasury will be issuing 7-year FRN, 14-month discount bond and 10-year fixed-coupon bond on April 1 and 2. Over the last few days, the ISE ON TRY rate has been surfacing above the 4.5% lower boundary of the interest rate corridor as an indication that the CBT is tightening the TRY liquidity. Although it is yet to be seen whether this tightening is part of the CBT's new monetary policy stance, this may have caused the local banks to be hesitant in their bids at the auctions. As for foreign investors, the global steepening trend for yields on the back of stronger U.S. economic activity, as well as the record high foreign participation in the local bond market may have curbed the incentive to build more positions. The pressure on yields may continue at least until the next bid loaded redemption date.

Source: bne