Lira Advances First Day in Three on Draghi’s Bond-Purchase Plan

The lira gained for the first time in three days, erasing earlier losses, after a report that the European Central Bank’s bond-buying program involves unlimited purchase of government debt, bolstering risk sentiment. Bond yields fell.

The lira strengthened less than 0.1 percent to 1.8190 at 5:02 p.m. in Istanbul, after weakening as much as 0.4 percent in intraday trading. Yields on two-year benchmark debt retreated 3 basis points, or 0.03 percentage point, to 7.60 percent, declining for a second day.

The euro jumped half a cent to $1.2596 after a Bloomberg report that the ECB would refrain from setting a public cap on yields and sterilize bond purchases, according to two central bank officials briefed on the plan. The plan will only focus on government bonds rather than a broader range of assets and will target short-dated maturities of up to about three years.

“The report was viewed as positive for risk sentiment,” Emir Baruh, a currency trader at Akbank TAS (AKBNK) in Istanbul, said in e-mailed comments.

ECB President Mario Draghi is expected to unveil details of his bond-buying plan tomorrow at the bank’s monetary policy meeting.

Turkey’s central bank lent 2 billion liras ($1.09 billion) at its lowest 5.75 percent policy rate today, compared with 3.5 billion liras provided a week earlier in the one-week repurchase agreements auction.

Average borrowing costs for lenders fell to 6.41 percent on Aug. 28, the cheapest since November. Funding costs were as high as 8.74 percent in July and 11.93 percent in January.

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