Turkish Yields Fall Seventh Day to Record Low; Stocks Decline

Turkish bonds yields fell for a seventh day, declining almost 2 percentage points this year, to a record low on expectation of continued loose monetary policy by the central bank next year.

Yields on two-year benchmark bonds fell 7 basis points to 7.08 percent at 11.12 a.m. in Istanbul, according to the RBS Istanbul Benchmark Bond Index. The yields were 9.06 percent at the end of last year.

“There is no reason for bonds yields not to test 7 percent in this year-end rally,” Haluk Burumcekci, chief economist for Fortis Bank AS in Istanbul, said in a note to investors.

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 by telephone.

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 fell 0.1 percent to 66,678.34, bringing this year’s rally to 26 percent. The lira gained 0.1 percent to 1.5538 against the dollar today, trimming this year’s loss to 3.7 percent.

The two-year benchmark bond yield has dropped 78 basis points this month, headed for the biggest monthly retreat since September 2009 as slowing inflation allowed the central bank to cut its benchmark rate to 6.5 percent on Dec. 16.

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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