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This article was originally written for Türkiye Today’s weekly economy newsletter, Turkish Economy in Brief, in its Feb. 2 issue. Please make sure you are subscribed to the newsletter by clicking here.
Turkish markets got off to a strong and upbeat start in 2026. As January trading came to an end, the prevailing optimism was clearly reflected in the data.
Türkiye’s two-year benchmark bond yield ended in 2025 at 37.22%. As of now, the yield has declined to as low as 34.60%.
The country’s risk premium has also fallen to its lowest levels since 2018. During January, the five-year CDS briefly dropped to the 200 level before closing the month near 220.
Looking at broader market developments, the first Monetary Policy Committee meeting of the year was held in January. The Central Bank of the Republic of Türkiye (CBRT) maintained its cautious stance and cut the policy rate by 100 basis points to 37%.
Meanwhile, credit rating agency Fitch revised Türkiye’s outlook to “positive,” signaling a potential credit rating upgrade at the next review.
Foreign investor interest in Turkish bonds and equities has also increased notably. In the weeks ending Jan. 16 and Jan. 23 alone, non-residents purchased $2.35 billion worth of bonds and $687.5 million in equities.
Combined, foreign inflows through bond and equity markets exceeded $3 billion over these two weeks.
Expectations that inflation will continue to trend lower in 2026, along with a parallel decline in interest rates, stand out as the main catalyst supporting markets.
In the same period, the CBRT’s total reserves rose to a new record of $215.6 billion in the week ending Jan. 23.
In its statement, Fitch highlighted the stronger-than-expected increase in foreign exchange reserves, emphasizing reduced external vulnerabilities, a decline in FX-denominated liabilities, and the continued implementation of tight economic policies.
Market optimism carried Borsa Istanbul to new record levels in January. The BIST 100 index closed Jan. 30 at 13,838 points, marking a fresh all-time closing high. Having ended last year at 11,261, the index posted a monthly gain of 22.88%.
This marked the strongest monthly performance since July 2023 and the best January performance in 29 years, dating back to 1997. The index also tested an intraday record of 13,906 points.
As attention shifts to February trading, questions are mounting over whether the rally can continue. Three key domestic factors are set to dominate the agenda this month.
First, January inflation data, due on Tuesday, Feb. 3, will be closely watched. Economists surveyed by AA Finans expect monthly CPI inflation of 4.21% for January. A reading above expectations could prompt a more cautious market response, while a figure below 4% may help sustain optimism.
Second, CBRT Governor Fatih Karahan is scheduled to present the year’s first Inflation Report on Feb. 12.
His messaging will be closely followed by markets. The CBRT’s year-end 2026 inflation forecast range currently stands at 13%–19%.
Third, listed companies will begin releasing their 2025 financial statements throughout February.
The earnings season will kick off with banks—the market’s leading sector—in the first week, followed by results from major holdings, defense, and retail companies. These earnings will play a decisive role in shaping market direction.
Meanwhile, following the completion of January trading, new regulations were introduced to cap high-limit credit cards.
Some analysts suggest the move could affect consumer spending and, over the medium term, have implications for sectors such as banking and retail. Potential market impacts will be closely monitored.
In dollar terms, the BIST 100 last closed at 318.16. Analysts point to the $344 level—last tested in May 2024—as the first key resistance in the medium term. For the rally to remain intact, maintaining levels above $297 is seen as critical, even in the event of profit-taking.
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