July 14 (Bloomberg) -- Turkish bonds yields dropped the most in almost three months in Istanbul and the lira strengthened as turmoil in European debt markets made Turkey’s relatively high yields more attractive to investors.
The yield on two-year benchmark bonds declined 17 basis points to 8.86 percent at 4:59 p.m., the biggest fall since April 21. The lira rose 0.2 percent to 1.6391 per dollar.
The International Monetary Fund called for a “greater sense of urgency” in solving Greek’s debt crisis, saying “downside risks have risen” and the risks of not doing so would be “severe.” Italy sold five-year bonds at 4.93 percent, the highest yield in three years, and Greece’s credit rating was cut three levels by Fitch Ratings to its lowest ranked tier.
“The levels are attractive for all investors and the lira will probably rally against the euro-dollar basket so for today everything looks positive,” Yagiz Oral, a fixed-income trader at Denizbank AS said in response to e-mailed questions. “Look at all emerging market bond yields, you won’t see any higher yields than Turkey.”
The markets are also starting to change their outlook on the central bank’s policy of keeping rates low even as growth boomed to 11 percent in the first quarter.
“Until last week it wasn’t appreciated by the market, but this week people see that it is working,” Oral said.
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