Bonds retreated after the Turkish central bank reduced the minimum amount it lends for a week at the lowest funding rate.
The bank cut the funds it will make available over the next two weeks at 5.75 percent to 1 billion liras ($557 million) from 6 billion liras in the previous two weeks. The yield on two-year benchmark debt increased for the first time in three days, up five basis points, or 0.05 percentage point, to 9.40 percent, taking the rise this week to eight basis points. The lira was little changed at 1.7927 per dollar.
“This can be seen as a signal the central bank will continue with additional tightening,” Tufan Comert, a strategist at Garanti Investment in Istanbul, said in an e- mailed note.
Turkey’s central bank varies the rate at which it provides liquidity on a daily basis, maintaining the borrowing cost within a 5.75 percent to 11.5 percent interest-rate corridor it introduced last year. It has refrained from lending at the lowest rate since April 11, a day after the lira weakened to its three-week low at 1.8177.
The bank today lent 7 billion liras at 10.8 percent against bids for 13.9 billion liras.
The current-account deficit in Turkey is about 10 percent of gross domestic product, the biggest among 60 major economies tracked by the International Monetary Fund as a proportion of GDP. The country’s inflation rate is 10.4 percent which is more than twice the bank’s target for this year.
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