The Turkish Treasury on May 29 sold €1bn worth of 364-day EUR-denominated lease certificates to local lenders, the treasury and finance ministry said.

The Treasury was collecting bids with a deadline of May 29, it said on May 27. The lease certificates will semi-annually pay 1.50% coupons. The issue was executed via the direct sale method and the settlement date is May 31.

€1.04bn worth of 728-day EUR-denominated domestic bonds at a semi-annual coupon of 1.55% were sold by the Treasury in January and it sold €916.4mn worth of 364-day EUR-denominated domestic bonds at a semi-annual coupon of 1.10% in March to local lenders via direct sales. The authority also sold €835mn worth of 728-day EUR-denominated domestic lease certificates at a semi-annual coupon of 1.45% in February and €555mn worth of domestic lease certificates at a semi-annual coupon of 1.55% in December to local lenders via direct sales.

Consequently, the Treasury has tapped a total of €4.35bn from local lenders via EUR-denominated domestic paper since December.

From September to February, the Treasury sold a total of €233.4mn worth of 364-day EUR-denominated domestic bonds at a semi-annual coupon of 1.25% and a total of $184.6mn of USD-denominated domestic bonds at a semi-annual coupon of 2% via public offerings. In September and October, it only managed to raise €10.5mn through 364-day domestic lease certificates at a semi-annual coupon of 1.10% via public offerings.

Consequently, the Treasury only borrowed €234mn and $185mn in total from local individuals from September to February.

Gold borrowings
From October 2017 to January 2019, the Treasury borrowed a total of 4.72 tonnes of gold via 728-day gold-denominated domestic bonds at a semi-annual coupon of 1.20% from individual investors while in February 2019 it borrowed 2.23 tonnes of gold via 728-day gold-denominated domestic bonds at a semi-annual coupon of 1% from institutional investors. From October 2017 to January 2019, the Treasury borrowed a total of 4.31 tonnes of gold via 728-day gold-denominated lease certificates at a semi-annual coupon of 1.20% from individual investors while in February this year it borrowed 24.2 tonnes of gold via 728-day gold-denominated lease certificates at a semi-annual coupon of 1% from institutional investors.

Consequently, the Treasury borrowed 5.95 tonnes of gold from local individuals while it borrowed 28.5 tonnes of gold from local institutions.

From October to March, the Treasury also sold a total of $7bn and €2.75bn worth of eurobonds abroad.

Currently, the Turkish government is solving its FX borrowing shortage and the central bank’s FX reserves dilemma via local lenders.

“Asked” for more bids
The government and local lenders have also struck a bargain to solve the government’s lira borrowing shortage. Private lenders increased their bids at this months’ lira auctions after the government “asked” them to do so. As part of their response, they requested a revival of 10-year benchmark auctions providing potentially more profitable debt.

Local lenders will also boost their lending via the government’s re-fuelled Credit Guarantee Fund.

According to official demands, private pension funds will increase their investments in the government’s lira bonds and they will buy equities at Borsa Istanbul. So, the USD-denominated benchmark BIST-100’s problematic testing of the 2009 dips will be solved.

Reported S-400 delay helps lira
Meanwhile, the Turkish defence ministry has solved the latest lira depreciation pressure by indicating that there will be a delay in the delivery of Russia’s S-400 missile defence system, which the US opposes to the point where it is threatening sanctions, while President Recep Tayyip Erdogan has proudly announced tht he will meet with his US counterpart at the end of June during the G-20 summit in Japan (that’s okay, but what happened to the invitation to Trump to drop in on Turkey?). Less troubled relations between Ankara and Washington could go a long way to providing some relief to Turkey’s troubled markets.

Russian President Vladimir Putin is perhaps a happy chappy as regards Syria because the Russian-backed Syrian forces are at last advancing in Idlib while the jihadists in Idlib are also perhaps cheered, with Reuters recently reporting that the Erdogan administration has provided them with US-made rockets to confront the attacks ordered by Damascus.

All next week is a Bayram holiday, so the public lenders, who’ll nevertheless stay on duty 24/7, might exploit the absence of locals pursuing dollarisation on the market, and with the help of foreign investors with more of a liking for the lira given latest geopolitical developments, may give Turkey’s currency a shot in the arm.

An attempt at removing the Ekrem Imamoglu problem (opposition politician Imamoglu won a shock victory in the Istanbul mayoral election at the end of March, but Erdogan’s ruling AKP party claimed “irregularities” affected the result, which was then subsequently annulled by the election watchdog, with a revote scheduled for June 23) bedevilling Erdogan is taking the form of a vicious and heavy media campaign, suggesting Imamoglu aims to govern Istanbul together with the Kurdish PKK and the Gulenist FETO—the “terrorist” network blamed by Ankara for the 2016 coup attempt—and plans many other manipulations that push the limits of one’s imagination.

Talking to Ocalan, bombing PKK in Iraq
As for dealing with the Kurds, on the one hand the Erdogan camp is sending out the message that it may revive talks with imprisoned PKK leader Abdullah Ocalan—if in turn Ocalan can persuade Kurds in Istanbul not to ‘re-vote’ for Imamoglu, the AKP will be boosted in its bid to overturn his victory—while on the other hand quite a big rumble is now coming from a military operation waged in northern Iraq—that move obscures the Ocalan talks, and sends a ‘comforting’ message to nationalist voters that Ankara hasn’t stopped chasing the insurgent Kurds wherever it finds them.

Retirement, social support and public wage payments will be made by the state before the Bayram.

Foreign tourists are coming, perhaps in droves.

All-in-all, the Erdogan administration has got a better grip on its most threatening troubles and is ready for a holiday.

The only thing missing is a new shock.