Turkish bond yields climbed as oil increased and bondholders boosted expectations for inflation before a central bank rate meeting tomorrow.
Yields on two-year benchmark debt advanced 10 basis points or 0.10 percentage point, to 7.33 percent at the 5 p.m. close in Istanbul, the biggest increase since Sept. 12. The yield on lira bonds due in January 2022 rose nine basis points to 8.30 percent today, the highest level since Aug. 22.
Crude gained for a third day on concern that tension in the Middle East will disrupt supplies. Turkey imports more than 98 percent of the oil it consumes. Bondholders lifted their inflation projections to 6.4 percent today, the highest level in more than three months, based on the extra yield on fixed-rate lira bonds over notes paying returns tied to consumer prices.
“We see selling in 10-year bonds,” Ugur Kucuk, a fixed- income strategist at Is Investment Securities in Istanbul, said in e-mailed comments. Inflation expectations in the medium term are rising, he said.
The lira fell less than 0.1 percent to 1.7969 per dollar, paring this month’s increase to 1.2 percent, the lowest gain among emerging markets in Europe, Africa and the Middle East.
Turkey’s benchmark two-year yield has fallen 368 basis points this year, the biggest decline among emerging markets.
The central bank cut the average cost for lenders to 6.17 percent on Sept. 14, the lowest since November, as it lent at its minimum policy rate since June 4. That compares with a high of 11.93 percent on Jan. 6. The bank in Ankara provides funding to Turkish lenders at rates between 5.75 percent and 11.5 percent in daily repurchase agreement auctions.
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