Turkey’s central bank applies massive bids, locking in next week’s funds at a 37% interest rate

⑴ The Central Bank of Turkey announced on Monday that it carried out a repo operation with a scale of 1 billion lira through a quantity bidding method, with a maturity until August 31 and an interest rate set at 37%.⑵ This repo ultimately injected 10 billion lira of liquidity in full, yet market bidding demand was extremely strong, with total bidding amount reaching about 955 million lira and a bid multiple nearing 9.6 times, indicating banks’ intense demand for short-term funds.⑶ The policy rate of 37% remains at a high level. The central bank fully satisfied the market’s applications for weekly funds, but the excessive bid size highlights the significant financing pressure faced by financial institutions, with liquidity allocation tensions still prominent.⑷ From the bid multiple perspective, the market expects short-term interest rates may still have upward pressure. Although the central bank’s full supply temporarily stabilizes the benchmark anchor, the extremely high multiple may suggest banks are holding a relatively tight view on future funding conditions. It is necessary to watch next week’s maturity and renewal situation and the transmission effect of lira exchange rate fluctuations on repo rates.