Turkey’s central bank has offloaded its US Treasury holdings in a reconfiguration of its FX liquidity position amid the latest chapter of the Iran War. The move can be seen in US Treasury data.

Turkey’s US paper stock plummeted from $16bn in February to $2bn in March. Previously, the figure rose to $17bn in January from $14bn at end-2025.

Amid the latest clashes in the Iran War that took place between February 28 and April 8, the central bank burnt through an estimated figure of around $50bn in March to defend the embattled Turkish lira (TRY) amid severe carry trade outflows.

Tables: Based on calculations by IntelliNews of data seen in the Turkish central bank’s balance sheet, the rightmost column in the first table shows that the authority’s net FX position net of off-balance sheet items declined by $61.9bn in March.

However, this figure also includes the impact of the negative change in the gold price.

The rightmost column in the second table shows that the actual decline stood at $50.9bn when the gold reserves were adjusted to the gold price decline. This is the estimated figure that the central bank appears to have burnt through.

Crisis-era liquidity management

The sharp decline in Turkey's US Treasury holdings has provided plenty of good "clickbait" headlines, but merits more serious assessment. The decline in Turkey's gold reserves in Marchalso caught headline writers' attention.

As part of its liquidity planning, the central bank also sold gold reserves while introducing gold swap agreements alongside its US Treasury paper liquidations.

The central bank is estimated to have utilised around 76 tonnes of gold for gold-for-foreign-currency swap contracts in March.

Table: The third column (entitled A.11 Gross gold (gram)) in the Gold Price Effect table above shows that the central bank’s gross gold reserves declined by 121 tonnes to 702 tonnes at end-March from 823 tonnes at end-February.

The Net Gold (gram) column, meanwhile, shows that the net gold reserves declined by 128 tonnes to 440 tonnes from 568 tonnes. This is the actual gold reserve loss.

The table above, meanwhile, also shows that 76 tonnes of gold was actually swapped. The latest data suggest that, as of May 8, 43 tonnes of outstanding gold-to-FX swap stock executed in London had a maturity of between one to three months.

Other EMs mount same defence

Turkey’s financial engineering reflects a broader trend that swept through emerging markets as the closure of the Hormuz Strait hit countries' currencies due to global inflation fears amid booming energy bills.

Foreign governments collectively sold $138bn worth of US Treasury papers in March alone, bringing the total holdings to $9.25 trillion from $9.49 trillion in February.

China’s US Treasury holdings declined by 6% m/m to $652bn in March while the holdings of Japan, the largest foreign holder of US Treasury papers, declined by $47bn in the month to $1.2 trillion.