CBRT: Discount rate increase in CPI-indexed securities

The discount rate for CPI-indexed securities in the collateral system of the central bank’s open market operations was increased from 50% to 60%.

With the announcement made on June 10, 2022, banks were required to issue long-term fixed-rate securities in TRY in addition to their foreign exchange deposit/participation funds, and the securities establishment rates were differentiated according to the conversion rates of the banks. With these practices, it is aimed to increase the efficiency of the monetary policy within the scope of the liraization strategy. With the obligation to create long-term fixed-interest securities in TRY and the changes made in collateral management, a trend towards long-term fixed-interest bonds was observed in the GDDS market. As a result, there have been different rates of change at the short- and long-term ends of the yield curve.

With this arrangement, we can say that there is a demand for a shift from floating interest rate papers to fixed rate papers. There was a significant weight of those indexed to CPI in the securities portfolios of banks, with the rules introduced recently, it was aimed to concentrate the collateral basket on fixed-rate GDDS instruments. In an environment where inflation is high, banks provide a serious income on the asset side thanks to CPI-linked securities. This effect was seen in 2Q22 financials and will likely be seen in the coming quarters. Of course, securities with varying returns according to CPI constitute a burden for the public, therefore, recent collateralization rules require a shift from CPI indexed to fixed-rate instruments. For this purpose, it seems that the discount rate of CPI indexed ones has been increased from 50% to 60%.

In terms of banks; The short- and long-term effects will vary. After the CBRT’s last security allocation rule, we saw a serious decline in bond rates. An increase in the price of fixed-rate bonds held in the active side of the balance sheet will make the short-term effects positive in terms of balance sheet value. In the long run, the income effect will be limited when the weight shifts to fixed income securities, as CPI indexes have made a huge positive contribution to returns. It should be noted that the impact of macroprudential measures in a broad perspective will depend not only on the direct numerical effects of current assets and liabilities, but also on the strategies implemented by both banks and the real sector in adapting to these new rules.

 Kaynak: Tera Yatırım- Enver Erkan
Hibya Haber Ajansı