Central Bank's repo auction increases interest rate cut expectations

The Central Bank of the Republic of Turkey (CBRT) conducted a quantity-based repo auction of 100 billion TL with a maturity date of June 17, 2025. This step has increased market expectations for an interest rate cut. While a total of 648 billion 945 million TL in bids were received for the auction, the simple interest rate was set at 46 percent.

Following the repo auction, the banking index saw an increase of nearly 3 percent, and this rise subsequently climbed above 4 percent. The BIST 100 index also continues to follow a positive trend.

Experts state that this development carries a signal for an interest rate cut. Portfolio manager Murat Aysan stated that the Central Bank unexpectedly opened a 100 billion TL weekly repo, which created a significant impact on the markets. E507 predicts that the liquidity deficit is around 500 billion TL and that if such auctions continue, the overnight interest rate will decline smoothly.

Trive Investment Research Director Eren Can Umut stated that this step has positively affected the banking index and increased the probability of an interest rate cut at the Monetary Policy Committee meeting on June 19. However, Umut added that he does not expect this cut to take place in June.

Colendi Securities Research Analyst Sadullah Çalışır said that conducting the repo auction after the holiday was a strategic move and that there is no longer a need for the 49 percent upper band.

Info Investment Investment Consultant Tunç Safa Altunsaray stated that the Central Bank's decision to start using the weekly maturity will lead to a decline in the AOFM (Average Funding Cost) and that this situation strengthens the possibility of an interest rate cut.

Finally, Kuveyt Türk Investment Research Specialist Muhammet Çakmak stated that this step is important for closing the liquidity deficit and that the rise in the BIST 100 index continues, led by the banking sector.

News Source: 12punto