A second successful auction of one-year bonds was held by the treasury on 23 March, giving a confidence boost to the country’s money and capital markets (MEED 31:3:95). The treasury sold bills valued at TL 53.4 million million ($1,280 million) to bids totalling TL 110.6 million million ($2,640 million).

At the same time, it managed to lower the maximum interest of the bills compared with the previous one-year auction by 4.3 percentage points to 122.5 per cent, and the average rate by 3.7 percentage points to 121.8 per cent. This is another encouraging development for financial stabilisation, say Istanbul market sources.

The initial auction on 21 March was the first of one-year bills since May 1995. Since January, the treasury has moved away from the short-term, three-month borrowing at high interest rates it previously was forced to rely on during last year’s financial crisis.

Bankers say this means the treasury will have a period in May, starting from the maturity of January’s three-month issues, when its monthly domestic debt servicing bill will fall sharply to about TL 10 million million ($238 million) from about TL 200 million million ($4,700 million). This will increase its ability to reduce its benchmark interest rates for the banking sector, analysts say.