Full Breakdown
Turkey Sells Almost All U.S. Treasury Holdings to Defend Lira Amid Iran Conflict
5/23/2026, 12:19:37 PM
Core Event: Massive Treasury Liquidation in March 2026
In March 2026 Turkey disposed of the bulk of its U.S. Treasury portfolio. Bloomberg-compiled estimates show holdings fell to $1.8 billion by month-end, down from $16 billion the month before. Middle East Eye reports a similar decline to $1.6 billion. The sale represents an 89 % reduction, roughly $14 billion of debt liquidated in a single month, according to CryptoBriefing.
Background & Context: War-Driven Energy Shock and Political Turbulence
The U.S.–Israeli war on Iran, which began on 28 February 2026, sharply raised global oil and gas prices. Turkey, which imports almost all of its energy, faced higher import bills and a halt to Iranian gas supplies after attacks on the South Pars field. Inflation accelerated to 32.4 % and the central bank lifted its year-end inflation target to 24 %. Concurrently, a Turkish court annulled the party congress that had elected CHP leader Ozgur Ozel, prompting a market rout.
Key Figures & Groups
- Central Bank of the Republic of Turkey (CBRT) – executed the Treasury sales, foreign-exchange sales, and a historic gold drawdown of 127 tonnes.
- Manuel Mondia, Portfolio Manager, Aquila Asset Management AG – market analyst commenting on FX pressure.
- JPMorgan – issued a client note on the political risk.
- Turkish Minute – reported market reactions.
- Republican People’s Party (CHP) – opposition party denouncing the court ruling.
Data & Statistics
- Treasury holdings: $1.8 bn (Bloomberg) vs $1.6 bn (Middle East Eye).
- Prior holdings: $21 bn (Feb 2025) and $15.7 bn (Feb 2026).
- Liquidated amount: $14 bn (CryptoBriefing) vs $8 bn (Reuters).
- State lenders sold $6 bn of foreign assets on the same day.
- 10-year Turkish bond yields reached 35.75 %.
- BIST 100 index fell 6.1 % (Bloomberg) / >6 % (Breitbart).
- Lira depreciated ~5 % against the dollar since the war’s onset.
- Overnight policy rate raised to 40 %.
Official Statements & Responses
The CBRT declined to comment on the Treasury sales, a standard practice for its interventions. It confirmed tighter funding conditions, foreign-exchange and gold sales, and a swap of gold from reserves. The central bank announced an inflation-target increase to 24 % for 2026, citing “elevated uncertainty.” JPMorgan noted that “the political upheaval from the Ozel court ruling came at ‘an unhelpful time’ for the Turkish economy.” Turkish Minute documented the market plunge following the court decision.
Criticism & Opposition
The CHP labeled the court’s removal of its leader a “judicial coup.” Analysts described the Treasury liquidation as a liquidity play rather than an ideological shift, warning that the rapid drawdown leaves the CBRT with limited ammunition for future currency stress.
On-the-Ground Market Reaction
On the day of the sales, the BIST 100 index dropped more than 6 %, triggering a circuit breaker, while banking shares fell over 8 %. Turkish bond yields surged to record highs, and the lira’s depreciation intensified pressure on import-dependent sectors.
Conflicting Reports & Gaps
- Holdings figures differ: $1.8 bn vs $1.6 bn.
- Liquidated amounts vary between $14 bn and $8 bn.
- No official breakdown of which entities (central bank vs private firms) contributed to the sales.
- April reserve data remain pending, leaving the full scope of the intervention unclear.
Verbatim Quotes
1. “We are seeing severe pressure from FX markets because many investors are worried about Turkey’s trade deficit and political risk, which can be a difficult combination,” — Manuel Mondia, Portfolio Manager, Aquila Asset Management AG
2. “Borsa Istanbul’s benchmark BIST 100 index fell more than 6 percent after the decision, triggering a circuit breaker. Banking shares, which are more exposed to interest rate expectations and currency stress, dropped more than 8 percent,” — Turkish Minute
3. “In a note to clients on Friday, JPMorgan said the political upheaval from the Ozel court ruling came at “an unhelpful time” for the Turkish economy.” — JPMorgan note
4. “Ankara dumped $14 billion in US government debt in a single month, slashing its holdings by 89% as the lira cratered under wartime pressure.” — CryptoBriefing
5. “judicial coup” — Republican People’s Party (CHP)
What’s Next: Anticipated Developments
April’s U.S. Treasury holdings data will reveal the final extent of the liquidation. The CBRT is expected to continue monitoring the lira, with possible further foreign-exchange sales or rate adjustments. Market participants will watch for additional political developments, especially any reversal of the court’s decision, which could influence investor confidence and currency stability.
