Bloomberg News

Turkey Central Bank Lending Rises to 36 Billion Liras

October 28, 2011

(Updates with overnight lending in first paragraph, analyst comments in fourth and sixth.)

Oct. 28 (Bloomberg) -- Turkey’s central bank lent a record 25 billion liras ($14.3 billion) in a one-week repo auction at its benchmark rate of 5.75 percent and 11 billion liras via overnight repo to largest banks at 12 percent annual rate today.

The biggest amount it previously lent via one-week repo was 19 billion liras on Sept. 16, according to data on the bank’s website. The bank in Ankara also got a record 48.1 billion liras demand for one-week repo since it capped the banks’ bids at as much as 20 percent of the offered amount in the auctions on Aug. 4.

The central bank is driving up interest rates by restricting funding at the lower rate, forcing banks to borrow at higher costs, under a policy announced this week. Governor Erdem Basci said tighter monetary conditions are needed to contain inflation and prevent excessive lira depreciation.

“I see the central bank keeping the tight conditions in place and this is likely to continue until the monetary authority is completely satisfied with the re-pricing of all interest rates, including deposits and loans in the system, as well as stability in the currency market,” Tevfik Aksoy, chief economist for the region at Morgan Stanley & Co. in London, said in an e-mailed note.

Markets in Istanbul closed at 12:30 p.m. today ahead of a public holiday Oct. 29.

“The market was in need of 35 billion liras liquidity today and the bank provided 25 billion liras in one-week repo,” Yagiz Oral, a trader at Denizbank AS in Istanbul, said by telephone. “About 6 billion to 7 billion liras of the liquidity demand stems from end-October tax payments.”

The bank’s repo lending was 8 billion liras for one week at the benchmark rate and 10.7 billion liras overnight yesterday.

--Editor: Steve Bryant

To contact the reporter on this story: Aydan Eksin in Istanbul at aeksin@bloomberg.net

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net


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