Treasury to pay 210 billion in debt over three months

The Treasury, which is trying to finance extraordinary budget deficits that have exploded due to the high inflation environment and the impact of earthquake-related expenditures, is making heavy domestic debt repayments at very high interest rates. The Ministry of Treasury and Finance plans to take on 224.4 billion TL in new debt against 210.6 billion TL in debt service for the period of November 2023–January 2024.

According to the report by Mehtap Özcan Ertürk from Sözcü, the domestic debt rollover ratio for the three months in question will be 116 percent. In other words, for every 1 TL of debt it pays, it will borrow 1.16 TL. According to the domestic borrowing strategy announced by the Ministry, it will go for a total of 78 billion TL in domestic borrowing against a total of 78.4 billion TL in domestic debt service in November, a total of 40 billion TL in domestic borrowing against a total of 39.4 billion TL in domestic debt service in December, and a total of 126.4 billion TL in domestic borrowing against a total of 92.8 billion TL in domestic debt service in January.

INTENSE DEMAND FROM THE GULF

Last week, the Treasury borrowed approximately 21 billion TL through 2-year and 10-year benchmark bond auctions as part of its November borrowing strategy. This week, it borrowed approximately 40 billion lira more in 4 auctions. Furthermore, the Treasury is borrowing at high interest rates exceeding 42 percent to secure foreign capital inflows and finance debt repayments. While it did not go unnoticed that 200 investors showed demand for 3 times the issuance amount, nearly half of the demand came from Gulf countries. With this issuance, the total amount borrowed from international capital markets in 2023 reached 10 billion dollars. The sukuk transaction, which is rumored to be issued specifically for the United Arab Emirates (UAE), remains on the table independently of this issuance.

BORROWING ABOVE 42 PERCENT

In the auctions held by the Treasury this week, the compound interest on the 2-year benchmark bond rose to 42.18 percent from the single-digit levels it had fallen to due to regulations that forced banks to buy bonds. Despite the record drop in foreign share between the two elections held in May, the compound yield, which had fallen to around 8.6 percent with Central Bank regulations, has risen by more than 33 points in the approximately 6 months that have passed. In the 10-year bond issuance, the compound interest rose to 31.98 percent.

News Source: 12punto