Turkish Yields Rise First Time in 13 Days on Tighter Liquidity

Turkish bond yields rose for the first time in 13 days after the central bank cut by half the amount of daily liquidity it offers to lenders, tightening money supply.

Yields on two-year benchmark debt rose two basis points, or 0.02 percentage point, to 7.92 percent, paring this month’s fall to 55 basis points.

The central bank reduced the size of its lending at the lowest 5.75 percent funding rate by 50 percent today from last week, providing 1 billion liras ($551 million) in its repurchase agreements auction. The overnight cost of borrowing increased to 8.2 percent yesterday in the interbank market, the highest level since July 4. This compares with 9.6 percent at the end of June.

“The central bank will probably not cut the funding cost further in the short term,” Erkin Isik, a fixed-income strategist at Turk Ekonomi Bankasi AS (TEBNK), said in e-mailed comments. It will hold the “funding rate around 8 percent,” he said.

The lira depreciated for the first time in three days, down 0.7 percent to 1.8229 per dollar, paring its gain this year to 3.8 percent.

The dollar gained versus all of its 16 most-traded peers except the yen after South Korea unexpectedly lowered interest rates, while the euro slid below $1.22 for the first time since July 2010. The Bank of Japan (8301) refrained from expanding stimulus on signs of domestic economic strength. Australia’s dollar dropped after employers cut payrolls.

The Federal Reserve yesterday disappointed investors seeking a more definitive signal for further quantitative-easing measures, fueling the global risk-off sentiment. China’s economic growth slowed to an annual 7.7 percent last quarter from 8.1 percent in the previous three months, according to a Bloomberg survey.

To contact the reporters 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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