Turkey’s bond yields rose to the highest in a year after the central bank did not provide funding in its one-week repo auction for a third day and sold dollars. The lira erased its gains after Premier Recep Tayyip Erdogan said the “main opposition will pay price for backing protest.”
Yields on two-year benchmark notes surged 44 basis points to 8.05 percent, the highest on a closing basis since July 5. The yield on 10-year bonds also climbed for a second day and traded 33 basis points higher at 8.65 percent.
Turkey’s central bank did not provide funding at the 4.5 percent policy rate today. It sold $50 million today and $350 million yesterday, intervening for a third time since anti-government protests broke out at the end of May. Turkish people will not bow to artists and writers who are “humiliating” them, Erdogan said at a party rally in the central Anatolian city of Kayseri today.
The lira depreciated 0.4 percent to 1.9458 per dollar, weakening for a fifth day to a record low and wiping out gains of as much as 0.7 percent.
The 14-day relative strength index for the USDTRY cross rose to 75, from 73 yesterday. A level above 70 indicates to some technical analysts that the local currency is oversold relative to the euro and poised for a rebound.
The cost of funding in the Turkish interbank market rose to 5.69 percent today, the highest level since April 12. The central bank’s weighted average cost of funding the lenders rose to 5.26 percent yesterday, the highest level since April, according to data compiled by Bloomberg.
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