ANKARA — In a dramatic response to mounting regional economic pressures, Turkey liquidated nearly all of its US Treasury holdings in March, cutting its exposure to US government debt to protect its local currency.

According to Bloomberg calculations based on official US Treasury International Capital (TIC) data, Turkey’s position plummeted from $15.72 billion in February to a mere $1.8 billion by the end of March marking a massive 89% reduction in a single month.

The abrupt, multi-billion-dollar sell-off reflects the intense financial pressure bearing down on the Turkish economy following the outbreak of the US-Israeli conflict with Iran on February 28. The crisis triggered swift capital outflows, sent global energy prices soaring, and unleashed heavy selling pressure on the Turkish lira (TRY).

The Anatomy of an Emergency Market Intervention

Faced with a rapidly depreciating currency, the Central Bank of the Republic of Turkey (CBRT) and domestic institutions deployed their most liquid foreign assets to meet the surging demand for US dollars. Because US Treasuries are highly liquid, they served as a vital financial reserve for open-market interventions.

The liquidation was part of a broader, aggressive emergency strategy implemented by Turkish authorities during the first month of the regional conflict:

    •    Reserve Drawdown: The CBRT’s balance of payments recorded a staggering $43.42 billion decline in total reserve assets during March alone, with some bankers estimating total reserve losses closer to $55 billion.

    •    Gold Deleveraging: Turkey also mobilized its gold reserves, liquidating or swapping more than 127 tonnes of gold—marking one of the largest gold drawdowns in the country's modern financial history.

    •    Foreign Debt Offloading: Alongside US Treasuries, the central bank reportedly offloaded roughly $22 billion in other foreign government securities.

Despite these aggressive measures, the lira hit multiple historic lows, sliding to between 44.5 and 45.6 against the US dollar between late March and May.

Severe Energy and Inflationary Bottlenecks

Turkey’s structural economic vulnerabilities leave it highly exposed to Middle Eastern supply chain disruptions. The country relies almost entirely on foreign imports for its oil and gas needs.

Before the outbreak of hostilities, Turkey sourced approximately 14% of its natural gas directly from Iran. However, those cross-border flows halted entirely following a targeted attack on Iran’s South Pars gas field. The combination of disrupted supply lines and elevated global crude oil prices has severely expanded Turkey's import bill, which must be settled in dollars.

To compound the distress, rising energy prices have driven global bond yields higher. The corresponding spike in US Treasury yields has inadvertently increased borrowing costs for Turkey, making its own riskier sovereign debt far less attractive to foreign institutional investors.

Broader Diplomatic and Structural Shifts

While the March sell-off was primarily a tactical liquidity maneuver to support the currency rather than an ideological stance, it continues a long-term downward trajectory. A decade ago, Turkey was a top-20 holder of US sovereign debt, with holdings peaking near $80 billion.

Bilateral political disputes historically chilled those numbers, though Ankara had recently built its holdings back up to a cyclical high of $21 billion in early 2025. The March crash effectively erases all recent progress, leaving Turkey as a negligible holder of US debt compared to regional peers like Saudi Arabia ($150 billion) or the UAE ($114 billion).

International analysts warn that while the aggressive reserve dumping halted a total collapse of the lira, it has severely weakened Turkey’s defensive cushion. If regional tensions continue to squeeze energy markets through the summer, the central bank will have significantly fewer liquid assets available to intervene, leaving the country heavily reliant on tight domestic monetary policies such as its current 50% repo rate to anchor the economy.

An 89% crash in US debt holdings down to $1.8 billion highlights Ankara's intense, multi-front defense of the Turkish lira.