Turkish Yields Fall Seventh Day to Record Low; Stocks Advance

Turkish bond yields fell for a seventh day, the longest stretch of declines since July 2009, on speculation the central bank will keep interest rates at a record low. Stocks advanced for an eighth day.

Yields on two-year benchmark bonds retreated 8 basis points to 7.09 percent at 5.40 p.m. in Istanbul, according to the RBS Istanbul Benchmark Bond Index. The yield has decreased 197 basis points, or 1.97 percentage points in 2010, heading for its fourth annual drop.

“There is no reason for bond yields not to test 7 percent in this year-end rally,” Haluk Burumcekci, chief economist for Fortis Bank AS in Istanbul, said by telephone. The central bank has expressed its intention to keep interest rates at low levels even if doesn’t cut rates below their historic low 6.5 percent, Burumcekci said.

The two-year benchmark bond yield has dropped 77 basis points this month, headed for the biggest monthly retreat since July 2009 as slowing inflation allowed the central bank to cut its benchmark rate to 6.5 percent on Dec. 16.

Businesses surveyed by the central bank estimated inflation at 6.95 percent by the end of the next 12 months, down from 7.14 percent in November, according to a report released on Dec. 22.

The ISE National 100 Index rose, climbing 0.2 percent to 66,822.14 in its longest streak since August 2009 and bringing this year’s rally to 27 percent.

The lira gained 0.1 percent to 1.5538 against the dollar, trimming this year’s loss to 3.7 percent.

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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