Goldman Sachs analyzed the recent volatility in Turkish money market funds, noting that the money exiting these funds is primarily being directed into Turkish Lira (TL) deposits. The firm's report highlights a significant increase in TL deposits, which rose by $12 billion in the week ending September 15, and accumulated to approximately $20 billion throughout September. This surge in TL deposits occurred despite a decline in deposit interest rates, which fell by 0.5 points to 43.9% annually in the week ending September 11.
The report indicates that roughly $1.8 billion was withdrawn from money market funds in the week ending September 11, bringing the total exodus to approximately $4 billion for the first two weeks of September. This shift suggests that investors are choosing TL deposits as an alternative investment despite the lower interest rate environment. Goldman Sachs noted that the increase in TL deposits demonstrates that a portion of investors are moving out of money market funds and into these deposits.
Furthermore, the Central Bank of the Republic of Turkey's (TCMB) gross reserves decreased by $9 billion in the week ending September 17, falling to $180 billion. Excluding gold valuation effects, the drop in reserves was $7 billion. The report also mentioned that the TCMB's total funding to banks increased by 38 billion TL week-over-week, reaching negative 948 billion TL by September 17, indicating a continuing excess liquidity in the banking system.
