After a prolonged period of elevated inflation, Turkish investors and global asset allocators are increasingly focused not just on nominal returns, but on real yield, the actual gain in purchasing power after adjusting for inflation.
Today, Türkiye presents a compelling case for investors who seek sustainable, policy-driven real returns in an emerging market undergoing disciplined macroeconomic rebalancing.
In 2024 and early 2025, Türkiye’s economic authorities made substantial progress in restoring price stability, supported by a combination of decisive monetary tightening and a renewed focus on external balance. The Central Bank of the Republic of Türkiye (CBRT) has reaffirmed its commitment to disinflation, taking bold steps to anchor expectations.
In April 2025, the CBRT raised its policy rate to 46%, emphasising that tight monetary conditions will be maintained until a sustained decline in inflation is achieved. Most importantly, this policy stance is backed by a strong preference for exchange rate stability, which plays a crucial role in containing inflation pass-through and rebuilding investor confidence. Market expectations reflect a steady decline in inflation over the coming quarters.
From an investor’s perspective, this macro shift is already translating into opportunities as local currency bonds are now offering positive real returns, especially as inflation expectations begin to decline and nominal yields remain elevated.
Exchange rate volatility has moderated, with options markets pricing in a narrower distribution of future exchange rates, which seems to be another sign of improving confidence. Also, Türkiye’s current account dynamics continue to strengthen, with the gold and energy-excluded balance in surplus and external financing conditions stabilising.
In this environment, short-term liquid funds have emerged as the most attractive vehicle for conservative investors. Given the current policy rate and stable money market yields, these funds provide high nominal returns with minimal duration risk, making them a preferred choice for capital preservation and real yield capture.
On the other end of the spectrum, long-term government bonds offer substantial upside potential, albeit with greater sensitivity to inflation and interest rate expectations. Today, long-dated bond yields in Türkiye remain well above not only current inflation, but also five- and ten-year forward inflation expectations, embedding a large inflation uncertainty premium. However, as disinflation materialises, this uncertainty premium will likely decline much faster than inflation itself, creating room for a significant re-pricing in long-term bond valuations.
TEB Asset Management believes the investment narrative in Türkiye is entering a new phase, one that is less about tactical gains from volatility and more about strategic positioning for real value.
While short-term instruments provide immediate real return, long-term bonds offer convexity and capital gain potential in a scenario where inflation and volatility decline faster than currently expected. A balanced approach, combining high-yielding liquid assets with select long-duration exposure, may prove especially effective in navigating this transition.
Türkiye’s macroeconomic rebalancing is still in progress, but recent trends, including improving inflation dynamics, a more stable currency outlook, and robust monetary policy credibility, provide a supportive backdrop for fixed-income strategies focused on real, sustainable returns.
In a world where real yield is increasingly scarce, Turkish assets offer a rare combination of high carry and policy alignment. For investors ready to look beyond the inflation headlines, this may be the right time to rediscover the strategic value of Türkiye’s fixed-income markets.