Turkey’s bond yields fell, set for a third week of losses, after the central bank took an unprecedented step of cutting all of its key interest rates.
Yields on the two-year benchmark notes fell 2 basis points, or 0.02 percentage point, to 5.54 percent at 3:53 p.m. in Istanbul, bringing its retreat this week to 19 basis points. The lira weakened 0.1 percent against the dollar to 1.7982, depreciating 0.6 percent in the past five days, the first weekly drop in four.
The central bank lowered its three main interest rates to limit the lira’s gains and support the economy. It slashed the one-week repo rate for the first time this year on April 16, cutting it by more-than-expected 50 basis points to a record 5 percent. That sent yields on January 2015 notes to a record-low of 5.49 percent on the same day.
“We have seen a quite sharp fall after the Monetary Policy Committee meeting,” Burak Cetinceker, a money manager at Strateji Menkul Degerler in Istanbul, said in e-mailed comments. “I don’t think yields will exceed 6 percent as long as rating upgrade story continues.”
Standard & Poor’s raised Turkey’s debt rating last month to BB+, equivalent to its ranking from Moody’s Investors Service and one step below investment grade, citing a move toward Kurdish settlement, a re-balancing of the economy and resilience to potential shifts in capital inflows. Moody’s said on April 11 progress in efforts to end a three-decade war with Kurdish militants would enhance Turkey’s creditworthiness.
Moody’s has a positive outlook for Turkey, while S&P views it as stable. Fitch Ratings lifted the nation to investment grade in November, the country’s first such ranking in 18 years.
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