Türkiye resumes buying US government bonds after ten-year hiatus

Türkiye has started buying US Treasuries for the first time in nearly a decade, marking the end of a pullback that began in 2016 amid rising tensions with the US, a person familiar with the matter told Bloomberg.

The country’s central bank has been buying US Treasuries as part of efforts to normalize its reserve policy, and its foreign currency holdings are now at a healthy level, the person said, requesting anonymity.

The amount of US Treasury bonds in Türkiye’s reserves has risen by $10 billion in the past year to $12 billion, according to US Treasury data compiled by Bloomberg. Ankara had divested most of its reserves, which reached almost $80 billion a decade ago, after relations with Washington began to deteriorate over a series of political and geopolitical disputes during Donald Trump’s first term in office.

The biggest purchases in recent months totaled about $6 billion in October, a month before Trump secured his return to the White House.

‘The increase in assets can be attributed to better relations and stronger foreign exchange reserves that make diversification meaningful,’ said Tufan Comert, director of global markets strategy at BBVA in London.

After his reelection in May 2023, Erdogan reshaped Türkiye’s economic policy, appointing ‘investor-friendly’ figures to ‘restore confidence in markets’ and contain inflation that has soared above 80%, according to Bloomberg.

Over the past year and a half, policymakers in the finance ministry and the central bank have worked to return to traditional policies, including raising interest rates from single digits to as high as 50% and rebuilding reserves that have been depleted as confidence in lira savings has eroded.