Turkish yields fell to the weakest in more than two weeks after the central bank lent the most it can in a day at its lowest funding rate, adding to the cash surplus in the market from the Treasury’s debt repayments.
The yield on benchmark two-year government debt dropped 9 basis points, or 0.09 percentage points, to 9.36 percent at the close in Istanbul, the lowest level since April 12. It has risen five basis points this month.
The central bank lent 6 billion liras ($3.4 billion) today, the maximum it can in a day, in one-week repurchase agreement auctions at its lowest funding rate of 5.75 percent. It lent 5 billion liras on Tuesday, 1 billion liras on Wednesday and 1 billion liras again on Thursday. Monday was a public holiday. The Treasury repaid 14.8 billion liras debt on April 25.
“There is excess cash in London after the latest repayment and this money is entering bonds and swaps,” Sercan Kiliclar, a fixed-income trader at Akbank TAS (AKBNK), said in e-mailed comments.
The central bank also raised the minimum outstanding repo funding to 9 billion liras at auctions from today to May 10, compared with 1 billion liras in the previous two-week period.
The lira strengthened for a fourth day and traded less than 0.1 percent stronger at 1.7613 per dollar. It has gained 1.2 percent this month, the fifth-best performance among emerging- market currencies tracked by Bloomberg.
“The central bank is happy with the current lira rate and it does not need to tighten further,” Erkin Isik, a fixed- income strategist at Turk Ekonomi Bankasi AS (TEBNK), said in e-mailed comments.
The bank last halted lending at the lowest funding rate on April 11, forcing rates as high as 11.5 percent on borrowers, after the lira weakened to a three-week low of 1.8177 per dollar.
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