Turkey bond yields fell for a ninth day, the longest losing streak in almost three years, and the lira weakened as the central bank extended its policy of cheaper funding, lowering borrowing costs.
The two-year benchmark debt yields slid four basis points to 8.02 percent at the 5 p.m. close in Istanbul, the biggest stretch of declines since the 10-day rout ended July 30, 2009. The lira depreciated for a third day, down 0.5 percent to 1.8179, the weakest on a closing basis since June 28.
The central bank lent 4 billion liras ($2.19 billion) today at its minimum 5.75 percent policy rate for a 24th consecutive day. The average funding cost for lenders retreated to 8.42 percent yesterday, the least since May 3. One-year interest rate swaps dropped today to the lowest level since Oct. 20, the fifth day of declines as traders bet on monetary easing after the Turkish economy shrunk 0.4 percent in the first quarter and inflation dropped to 8.9 percent in June from 11.1 percent in April.
“It is highly probable that the central bank will give dovish signals for the coming period even if it does not change its policy in the Monetary Policy Committee meeting on July 19,” Bora Tamer Yilmaz, a vice president at Halk Securities in Istanbul, said in an e-mailed note today.
The central bank will reduce its 6.5 percent inflation forecast “slightly” as it seeks to cut two-year inflation expectations toward the bank’s 5 percent target for this year, Central bank governor Erdem Basci said. Basci, who expects a gradual decline in core inflation, said loan growth may fall to 14 percent this year, the lowest since 2009.
The International Monetary Fund will reduce its estimate for global growth this year on weakness in investment, jobs and manufacturing in Europe, the U.S., Brazil, India and China, Managing Director Christine Lagarde said in a speech in Tokyo today.
Turkey’s first-quarter contraction in gross domestic product erased a 0.4 percent expansion in the previous quarter, according to data compiled by Bloomberg. The retreat in the January-to-March period was the first since the first three months of 2009 that capped four quarterly declines in the first recession since 2001.
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