Turkey Central Bank's Bond Buys Done for 2017, Official Says

Updated on
  • This year’s last buyback of government bonds was on Wednesday
  • Central bank official responds to Bloomberg questions

Turkey’s central bank ruled out buying more government bonds this year, after a rapid increase in recent months brought its holdings to the highest level since 2008.

The bank’s bond purchase at an auction on Wednesday was the last of 2017, a central bank official said in response to questions from Bloomberg, asking not to be named in line with policy. The bank has bought 2.4 billion liras ($648 million) of government bonds from the secondary market this year, increasing its holdings to more than 16 billion liras as of March 1, official data show.

Turkey’s Treasury is due to repay 17.6 billion liras of debt this month, the largest monthly redemption since March 2014. More than 1.3 billion liras in redemptions are scheduled for March 8 alone, the official said. Those will reduce the bank’s holdings to its target of 15 billion liras, the official said.

The pace of central bank purchases so far this year had fueled some speculation that the central bank was trying to drive down borrowing costs even as it tightened short-term money-market rates to support the lira. The official said interpretations of the bank’s intentions derived from a lack of information.

For more, read: Turkey Central Bank Races to Buy Bonds Before March Payments

The bank chose securities such that its purchases wouldn’t affect liquidity in the government bond market and to give commercial banks more flexibility in the way they manage liquidity, the official said. The bond purchases didn’t have an impact on the bank’s own liquidity policy, while its monetary policy stance remains unchanged, the official said.

The lira strengthened 0.2 percent to 3.7193 per dollar at 9:00 a.m. on Friday, after falling 2 percent on Thursday. The yield on Turkey’s 10-year government bonds extended losses after the news on Thursday and closed at 11.07 percent, according to data compiled by Bloomberg.

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