CBRT: Discount rate increase in CPI-indexed securities

The discount rate for CPI-linkers in the central bank’s open market operations (OMO) collateral system was increased from 60% to 70%. The move is part of a policy to increase the weight of government bonds in the OMO.

With the regulation made in August, it was aimed to create a demand for a shift from floating rate papers to fixed rate papers. There was a significant weight of those CPI-linkers in the securities portfolios of banks, with the rules introduced recently, it was aimed to concentrate the collateral basket on fixed-rate GDBS instruments. In an environment where inflation is high, banks provide a serious income on the asset side thanks to CPI-linkers. Securities with varying returns according to CPI constitute a burden for the public, therefore, recent collateralization rules require a shift from CPI-linkers to fixed rate instruments. For this purpose, it seems that the discount rate of CPI-linkers has been increased from 60% to 70%.

In the charts, the collateral pool held by the banks at the CBRT is presented in three basic items. When the collateral baskets at the CBRT are analyzed, it is seen that the share of fixed coupon, discounted, floating coupon and TLREF indexed securities in the GDDS basket has increased significantly, while the CPI indexed GDBSs have decreased. Note: While the GDDS basket consists of fixed coupon, discounted, floating coupon and TLREF indexed securities; Other assets consist of gold and foreign currency GDBS, eurobonds, effective and foreign currency deposits, gold collateral deposits, MBS/ABS and foreign country bonds and bills. Source: CBRT

Interest rates are variable in CPI indexed securities. This, of course, had an important place in the balance sheet protection of banks in the period of high inflation, because as the CPI increased, the banks were getting more returns. The Treasury has not been issuing foreign currency indexed issues for a while, it has been issuing Eurobonds abroad. It will also control domestic debt service by issuing more fixed income securities domestically. The last regulation, similar to the one in August, aims to make CPI-linkers less attractive to banks and to weight fixed income government bonds in securities.

 With the text of the “Monetary Policy and Liraization Strategy 2023” published by the Central Bank, the Minister of Treasury and Finance Mr. Nureddin Nebati’s statements made reference to the continuation of existing policies. We would like to remind you that there will be an election in the middle of the year and that there may be a possibility of change and transformation in monetary policy after the election depending on the results.

Kaynak: Tera Yatırım-Enver Erkan
Hibya Haber Ajansı