Turkey Yields Climb Most in a Month as Inflation Misses Estimate

Turkey’s bond yields rose the most in almost a month after inflation slowed less than economists expected last month, threatening the central bank’s forecast for the end of this year.

Yields on two-year benchmark bonds climbed 14 basis points, or 0.14 percentage point, to 7.75 percent at the close in Istanbul, the biggest increase since Aug. 7. The lira weakened 0.2 percent to 1.8208 per dollar, retreating for the seventh time in eight days.

The inflation rate declined to 8.9 percent in August from 9.1 percent in July as food and transport prices rose, the statistics agency in Ankara said on its website today. The median estimate of five economists surveyed by Bloomberg was 8.3 percent. The central bank’s core measure of price growth which excludes food and non-alcoholic beverages declined to 7.2 percent in August from 7.5 percent a month earlier. Oil prices advanced 11.5 percent in the three months through August.

“Commodity prices are rising and the lira is not strong,” Ugur Kucuk, a fixed-income strategist at Is Investment Securities in Istanbul, said in e-mailed comments. “The outlook on inflation is under risk.”

The central bank’s inflation estimate for the end of the year is 6.2 percent. The rate of price increases is expected at 8.9 percent in December and 7 percent in 2013, according to the median estimate of 22 economists surveyed by Bloomberg.

The bank provided 500 million liras ($274.6 million) at its lowest 5.75 percent funding rate in the one-week repurchase agreements auction today, compared with 7.5 billion liras provided Aug. 31. The average funding cost for lenders in Turkey fell to 6.41 percent on Aug. 28, the lowest since Nov. 21.

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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