Turkey’s US Treasury holdings plunged after March sell-off, Bloomberg estimates
Turkey sold nearly all its US Treasury holdings in March, liquidating roughly $14 billion and leaving about $1.6 billion, Bloomberg estimates, amid economic strain linked to the US‑Israeli war on Iran.
Turkey’s US Treasury holdings fell sharply in March after the country sold nearly all its remaining US debt, according to Bloomberg estimates based on US government data. The move—an apparent effort to raise dollars to defend the lira—reduced holdings to an estimated $1.6 billion from much larger levels a decade ago.
Bloomberg data shows near-total March liquidation
Bloomberg’s analysis, which synthesizes US Treasury reporting, indicates Turkey sold roughly $14 billion of US government debt in March.
That reduction follows a longer trend of declining foreign reserves and Treasury holdings as Ankara has sought to stabilize its currency and manage external pressures.
Officials and market participants described the timing as linked to the sudden spike in external risks since the outbreak of the US‑Israeli war on Iran.
Energy import costs and supply disruptions pressure the balance of payments
Turkey is heavily dependent on imported oil and gas, and rising global energy prices have pushed import bills sharply higher.
Before the conflict escalated, Turkey received about 14 percent of its natural gas from Iran; reports say those flows halted after an attack on Iran’s South Pars gas field, further squeezing Turkish energy supplies.
Higher import costs have widened the country’s current account needs and increased demand for US dollars, prompting asset sales to raise foreign-exchange liquidity.
Lira depreciation and higher global yields increase borrowing costs
The lira has continued a long period of weakness, and markets note a roughly five percent depreciation against the dollar since the regional war began.
At the same time, global concerns about inflation and tightening safe‑haven flows have pushed US Treasury yields higher, lifting borrowing costs for emerging markets including Turkey.
Rising yields reduce the appeal of riskier sovereign debt and complicate Turkey’s ability to finance deficits without further currency support operations.
Central Bank adjusts targets as inflation outlook worsens
In May, the Central Bank of the Republic of Turkey raised its inflation target for 2026 to 24 percent from a previous 16 percent, citing “elevated uncertainty” in public statements.
Major global banks have provided even more pessimistic projections: JP Morgan and Deutsche Bank have forecasted that headline inflation in Turkey could reach around 30 percent this year.
Those forecasts reflect the combined impact of exchange‑rate pass‑through, energy costs, and domestic pricing dynamics that have kept inflation elevated.
Market mechanics: why selling US Treasuries supports the lira
When a central bank or state sells US Treasuries, it typically converts those dollars into domestic currency or into cash it can deploy on foreign‑exchange markets.
Turkey’s Treasury disposals appear aimed at raising dollar liquidity that could be sold into markets to defend the lira or to meet foreign‑currency obligations.
But offloading large Treasury positions can also feed global yield moves; if many holders sell simultaneously, yields rise and borrowing costs climb for issuers across markets.
Regional comparison highlights the scale of the sell-off
Turkey’s remaining US Treasury holdings are now modest compared with regional peers: Saudi Arabia and the United Arab Emirates continue to hold tens of billions in Treasuries, historically around $150 billion and $114 billion respectively.
A decade ago Turkey’s holdings topped roughly $80 billion, underscoring how dramatic the recent normalization of its Treasury positions has been.
Analysts say Turkey’s shift reflects a choice to prioritize immediate currency stability over the longer‑term buffer provided by dollar‑denominated sovereign assets.
Domestic politics and emergency currency support
Reuters reported that Turkish authorities conducted targeted dollar sales to support the lira after domestic political turbulence, including a court annulment of a major opposition party congress that affected party leadership.
Policy responses combine monetary signals, reserve management and occasional market intervention, but they operate under the twin constraints of dwindling foreign assets and heightened external volatility.
Market observers warn that continued political uncertainty could keep pressure on capital flows and the currency unless confidence is restored.
The sell‑off of US Treasuries by Turkey in March reflects a broader squeeze brought on by regional conflict, higher energy costs and a deteriorating inflation outlook, and it highlights the limited scope for conventional policy tools in a country facing both economic vulnerabilities and geopolitical shocks.
