Turkish Yields Drop After Bank Resumes Lending at Lower Rate

Turkish bond yields dropped after the central bank offered funding to banks at its lowest rate for the first time in seven working days. The drop extended the biggest decline in bond yields in emerging markets this year.

Yields (BENCH) on benchmark two-year bonds fell 19 basis points, or 0.19 percentage point, to 9.31 percent at the close in Istanbul, their biggest drop since March 8. The lira gained 0.1 percent to 1.7829 per dollar.

The central bank today extended 6 billion liras ($3.4 billion) of funding to banks at its benchmark one-week repo rate of 5.75 percent, the first time it did so since March 22, when it began forcing banks to borrow at one-month repo rates of 11.5 percent.

“We’ve returned to a ‘normal day’ in monetary policy,” Gizem Oztok Altinsac, an economist at Garanti Securities, said in e-mailed comments. “The loosening in rates is occurring for this reason and may continue.”

The central bank in Ankara stopped lending at the benchmark rate on March 22, squeezing lira liquidity to support the lira and stem inflation, which was 10.4 percent in February.

Turkish bond yields have declined 169 basis points this year, the biggest drop among major emerging markets worldwide. The lira has appreciated 6 percent against the dollar on the year, after declining 18 percent last year.

To contact the reporter on this story: Aydan Eksin in Istanbul at aeksin@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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