Bloomberg News

Turkey Yields Drop to Two-Week Low on Rate-Cut Bets; Lira Falls

August 23, 2012

Bond yields headed for the lowest in two weeks on bets monetary easing in the U.S. will encourage the Turkish central bank to cut interest rates. The lira weakened.

Yields on two-year benchmark debt slumped 14 basis points, or 0.14 percentage point, to 7.67 percent at 10:30 a.m. in Istanbul, the lowest on a closing basis since Aug. 6. The lira depreciated less than 0.1 percent to 1.7935 per dollar, retreating for the first time in three days.

Minutes of the Federal Reserve’s most recent meeting showed U.S. policy makers favored further stimulus measures unless the economy shows signs of sustainable recovery. People’s Bank of China Governor Zhou Xiaochuan said yesterday adjustments to rates and bank reserve requirements are still possible after the central bank stepped up temporary cash injections this month.

“It will be easier for the central bank to loosen if there is more easing abroad,” Ugur Kucuk, a fixed-income strategist at Is Securities in Istanbul, said in e-mailed comments.

The central bank offered to lend today 5.5 billion liras ($557 million) at its lowest 5.75 percent funding rate, up from 5 billion liras provided last week in its one-week repurchase agreements auction.

The bank has lent at its minimum policy rate since June 4, bringing down average borrowing costs for lenders. The charge fell to 6.90 percent on Aug. 15 from 10.83 percent on May 25, according to data compiled by Bloomberg.

Central Bank Governor Erdem Basci, who varies interest rates daily between 5.75 percent and 11.5 percent to rein in credit growth and control inflation, said on July 26 he may narrow the band.

Lower Rates

“We are expecting interest rates to move towards 7 percent in the long term,” Bora Tamer Yilmaz, a vice president at Halk Securities in Istanbul, said in e-mailed comments. economic growth.

A preliminary reading of 47.8 for China’s purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics compares with July’s final 49.3 figure. If confirmed, it would be the lowest level since November and the 10th month that the reading has been below 50, the longest run in the index’s eight-year history.

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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