Turkey Sold Almost All US Treasury Holdings in March to Support Lira

According to Bloomberg's calculations based on data from the U.S. Treasury, Turkey's holdings of U.S. Treasury bonds plummeted to approximately $1.8 billion by the end of March, down from $16 billion at the end of February, with a monthly reduction of over $14 billion.

This is one of the series of intervention measures taken by the Central Bank of Turkey in response to market turmoil triggered by conflicts in the Middle East. After a sharp increase in oil prices impacted the Turkish market, the central bank quickly tightened financing conditions, synchronized sales of foreign exchange and gold assets, and utilized gold reserves for swap operations to curb the sharp devaluation of the lira.

The magnitude of the reduction is particularly noteworthy. Turkey's U.S. Treasury holdings had reached a peak of $80 billion about ten years ago and have gradually shrunk since then as relations between the U.S. and Turkey continued to deteriorate due to a series of political and geopolitical disagreements. After about a year of reserve rebuilding, their holdings rose to a high of $21 billion in February 2025, and are now almost completely liquidated.

The massive consumption of foreign reserves has not brought stability to the market. The persistent state of war puts continuous pressure on the lira, and last week the Turkish central bank increased its year-end inflation target from 16% to 24%. The latest data shows that the current annual inflation has reached 32.4%. The Turkish government bond market is also under pressure, with 10-year bond yields reaching a historic high of 35.75%.

Turkey is not alone. Since the outbreak of the Iran war, central banks of emerging Asian markets such as India and Indonesia have also increased their intervention efforts, with the Central Bank of Indonesia even unexpectedly raising interest rates to curb capital outflows. The collective consumption of U.S. dollar reserves by multiple central banks is becoming a potential pressure on the U.S. Treasury bond market that cannot be ignored.