While the World Plays 3-5-8, What Is Türkiye Doing?

Among card games, 3-5-8 (Sergeant Major) is an interesting game in which three players sit at the same table but pursue different targets. One player must take three tricks, another five, and the third eight. The players’ burdens differ; yet the game is played with the same deck, at the same table and under the same rules.

When one looks at world bond markets today, a similar but, from Türkiye’s perspective, deeply troubling picture emerges. Leaving aside the metaphorical tone and ironic emphasis of the title, this note is in fact a critical examination of Türkiye’s risk premium, cost of capital and debt capacity through 10-year bond yields.

As of 4 September 2026, 10-year government bond yields were approximately as follows:

Country	10-year government bond yield
Japan	2.91%
United States	4.78%
South Africa	8.70%
Türkiye	34.37%

While official US Treasury data show the US 10-year yield at 4.78%, the indicators for Türkiye, South Africa and Japan on the same date are approximately 34.37%, 8.70% and 2.91% respectively.

Viewed through the 3-5-8 metaphor, Japan is playing 3, the United States 5 and South Africa 8, while Türkiye has sat down at the same table but appears to have been assigned 34.

The fact that Türkiye’s 10-year rate of around 34% is becoming the base for almost all long-term financial decisions in the economy is affecting the system at its foundations.

In 3-5-8 the heaviest burden falls on the player who must take eight tricks. Yet the rules of the game assign no one the task of taking 34; there are only 16 tricks to be played in total. When Japan plays at about 3, the United States at 5 and South Africa at about 8 in the world bond market, Türkiye’s sitting down with about 34 means not merely that the game has become harder, but that the arithmetic of the game has changed entirely.

A 10-year yield is not only the state’s problem

The high level of government bond interest is sometimes assessed solely as the Treasury’s borrowing cost. In financial theory, however, the long-term government bond yield is one of the economy’s most important reference prices. In simplified form, the long-term nominal interest rate may be thought of as follows:

Nominal interest rate = real interest rate + expected inflation + term premium + risk premium

Türkiye’s 10-year bond being priced at around 34% therefore reflects not only the market’s view of today’s policy rate, but a collective pricing formed by expectations over the next ten years regarding inflation, monetary policy, fiscal policy, uncertainty and risk.

An important methodological warning should be made here. It is not correct to compare Japan’s 2.91% directly with Türkiye’s 34.37% and say that “Türkiye’s financing is twelve times as expensive as Japan’s”. The bonds are in different currencies; inflation expectations, monetary policies and risk structures differ.

That warning does not, however, remove the importance of the table for Türkiye. On the contrary, it raises this question: why, within the same global financial system, does an investor in one country lend to the state for ten years at about 3%, while in Türkiye about 34% is demanded? That is the question those concerned with the Turkish economy should address.

Firms cannot sit down at the table on better terms than the Treasury

If the state’s long-term borrowing cost is around 34%, the private sector cannot be expected to obtain long-term TRY financing consistently and well below that level. A firm’s borrowing cost may be thought of roughly as follows:

Firm borrowing cost = government bond reference rate + firm credit risk + liquidity premium + bank margin + other financing costs

A government bond yield of 34% is therefore not a ceiling for firms, but in most cases a floor (a base, a starting point). When firm-specific risk is added on top, the long-term nominal TRY financing cost can exceed 40%. The consequence in the finance literature is entirely clear:

As the cost of capital rises, the number of projects that can be invested in falls.

For an investment to create economic value, its expected return must exceed the cost of capital. In other words, it must satisfy IRR ≥ WACC. If a firm’s weighted average cost of capital is 15%, an investment yielding 20% will have a positive net present value. But if the cost of capital rises to 35–40%, the same investment loses economic meaning.

High interest therefore also means factories that will not be built, machines that will not be bought, capacity investments that will not be made and employment that will not be created.

The effect of the 3-5-8 game on corporate balance sheets

Let us take the metaphor a step further.

While a Japanese firm enters the long-term financing game at about 3, an American firm at 5 and a South African firm at close to 9, a firm in Türkiye faces a far higher reference-rate environment. The effect on debt capacity is very large:

Suppose a firm generates TRY 170 million of CFADS, cash flow available for debt service, per year. Let the CFO’s minimum DSCR target be 1.50. The maximum annual debt the firm can pay is then 170 / 1.50 = TRY 113.3 million.

Now assume hypothetically that the loan is interest-only and all other conditions remain the same.

If TRY 113.3 million of debt service (in this example, interest only, with principal repayment ignored) can be paid each year:

• At an interest rate of 34.37%, about TRY 330 million can be borrowed,
• At 8.70%, about TRY 1.30 billion,
• At 4.78%, about TRY 2.37 billion,
• At 2.91%, about TRY 3.89 billion.

The example above is a comparative hypothetical illustration that applies interest rates from different currencies and economies to the same corporate balance sheet; it is not a real debt-capacity calculation. Yet the arithmetic shows a very important fact: as interest rises, the amount of debt the same cash flow can carry shrinks markedly. Note that the interest rates above answer the question: if Türkiye’s rates at the beginning of September 2026 were like those in South Africa, the United States and Japan, how much could a firm with the same cash flows borrow? Naturally, borrowing potential also reflects growth potential. In a high-interest environment balance sheets do not grow sufficiently. Debt capacities fall. Investment thresholds rise.

If the state borrows at high interest, the private sector may leave the table

Here a second problem may also emerge: crowding-out. When the state issues high-yielding bonds, it offers financial investors a very strong alternative investment. Banks ask: is it not more attractive to buy high-yielding government bonds than to extend long-term credit to a risky firm? If the answer is yes, the private sector faces not only the problem of high interest but also difficulty in accessing credit. In the end, as a larger share of the economy’s financial resources flows to public financing, the resources that can be channelled to productive private investment may shrink.

In such an environment the investment decision facing a manager in Türkiye differs structurally from that facing a Japanese or American manager. The CFO in Türkiye no longer asks only: “Is this investment profitable?” He or she must also ask: “Is this investment profitable enough to carry this financing cost?”

The most dangerous consequence: flight to the short term

In economies where 10-year yields are very high, the natural response is to flee the long term. The state may turn to shorter borrowing, banks to shorter lending, and firms to shorter financing. The result, however, is a widening maturity mismatch in the economy. Financing a long-lived factory with three-month or one-year funding is not financially sound. The firm must roll debt continuously.

The firm’s risk then ceases to be interest risk alone and is joined by refinancing risk.

Perhaps debt can be rolled today. But in two years?...

Why is Türkiye playing 34?

It would be incomplete to leave the critique at “interest rates are very high”. A high bond yield is an indicator distilled from a range of economic problems. In this sense, when things are not going well, interest rates rise.

If suppliers of funds demand a high long-term return, behind that lie expected inflation, inflation uncertainty, expectations about the future of monetary policy, perceptions of fiscal discipline, exchange-rate risk, country risk premium, policy predictability and the opportunity cost of holding TRY over the long term.

The sustainable solution is not to try to pull bond yields down by administrative means. The solution is to understand why suppliers of funds / investors demand 34% and to improve the adverse conditions behind that demand.

When lasting price stability is achieved, when inflation expectations are anchored, when the policy framework becomes more predictable, when the risk premium falls and fiscal and monetary policies support each other, long-term bond yields can also fall on a lasting basis.

The costs of behavioural deterioration

In 3-5-8 the player who must take eight tricks has a harder task than the player who must take three. Yet they still play the same game. Türkiye’s problem in today’s bond table is somewhat different: while Japan sits at about 3, the United States at about 5 and South Africa at about 9, 34 stands before Türkiye.

Simply put, this gap called interest expense (financing costs) is firms’ cost of capital, investors’ discount rate, firms’ debt capacity, banks’ loan pricing, the feasibility threshold of investments, the discount rate in company valuations and, ultimately, one of the basic financial determinants affecting the economy’s long-term growth capacity.

Real success for Türkiye is therefore not a fall of a few points in the 10-year bond yield over a month. Real success is Türkiye’s being able to return to “the table where the 3-5-8 game is played”. Because if an economy is forced to play with 34, society is paying high costs. Those costs are not always costs expressed in financial units. There is no such concept in the literature, but I call them “behavioural deterioration costs”. Behavioural deterioration can leave lasting damage, or damage that takes time to repair, both in firms and in society at large.