Bloomberg News

Turkey Bonds End Longest Winning Streak in Three Years on Europe

June 12, 2012

Turkey bond yields rose for the first time in nine days, snapping the longest winning streak since July 2009, as risk appetite deteriorated after German Chancellor Angela Merkel said it’s the wrong time to discuss possibility of euro bonds as a solution to Europe’s debt crisis.

The yield on two-year fixed income securities rose four basis points, or 0.04 percentage point, to 9.15 percent at the close in Istanbul, erasing earlier losses that brought them to the lowest level since Feb. 23 on a closing basis.

Introducing euro bonds “is putting the cart before the horse and absolutely leads us down the wrong road,” German Chancellor Angela Merkel said in a speech at her party’s economic council in Berlin today. Spain’s government notes extended a slump, pushing the yield on the five-year security above 6 percent for the first time since June 4. This helped erase gains recorded by lira bonds earlier today after the central bank lent 1 billion liras at its lowest funding rate of 5.75 percent. The bank provided funding today at the minimum policy rate for a sixth day.

“The risk-taking appetite in the globe has deteriorated and interest rates have increased,” Erkin Isik, a fixed-income strategist at Turk Ekonomi Bankasi AS (TEBNK), said in e-mailed comments.

Turkey’s central bank varies its funding rate on a daily basis, maintaining borrowing costs within a 5.75 percent to 11.5 percent interest-rate corridor introduced last year.

The lira strengthened 0.1 percent to 1.8284 per dollar, lifting its gains this year to 3.4 percent, the biggest appreciation among developed and emerging market currencies after the Colombian peso.

To contact the reporter on this story: Selcuk Gokoluk in Istanbul at sgokoluk@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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