Turkish bond yields retreated to the lowest since September as the central bank cut the cost of borrowing and the lira weakened after the U.S. Federal Reserve failed to signal imminent monetary easing.
Yields on two-year benchmark debt fell five basis points, or 0.05 percentage point, to 7.89 percent, the lowest level since Sept. 9.
The central bank lent 2.5 billion liras ($1.38 billion) at the lowest 5.75 percent policy rate today, up from 2 billion liras last week, reflecting its easing stance as the Turkish economy slows. It provided liquidity at the minimum funding rate for a 31st consecutive day, reducing the average cost of borrowing to 7.83 percent today, the lowest since April 10. None of the eight economists surveyed by Bloomberg forecast a cut in the main one-week repo rate when policy makers meet on July 19.
“We continue to think the funding rate will remain at 7.5-8.0 percent in the coming weeks and the central bank will not turn more dovish than that in the monetary policy committee meeting this Thursday,” Erkin Isik, a fixed-income strategist at Turk Ekonomi Bankasi AS (TEBNK) in Istanbul, said in e-mailed comments.
The lira depreciated for the first time in three days, weakening 0.2 percent to 1.8127 per dollar, after Federal Reserve Chairman Ben S.Bernanke refrained from discussing specific steps to boost the economic recovery in the U.S. A contraction in June retail sales yesterday rejuvenated bets the Fed will introduce more measures to support the world’s largest economy.
“The market had been expecting a more aggressive statement from Bernanke but he used the usual wording,” Tufan Comert, strategist at Garanti Securities in Istanbul, the brokerage unit of Turkiye Garanti Bankasi AS (GARAN) said in e-mailed comments. “That is why we are seeing selling in the market.”
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