Turkey Yields Decline 1st Day in 3 as Tension With Syria Recedes

Turkish bond yields fell for the first time in three days on bets the violence on the Syrian border that killed five people two days ago will not escalate. The lira gained.

Yields on two-year benchmark debt slid four basis points, or 0.04 percentage point, to 7.57 percent at the close in Istanbul. The lira appreciated for a second day, trading 0.2 percent stronger at 1.7949 per dollar.

Turkey fired into Syrian territory in retaliation against shelling by its neighbor. The lira weakened as much as 0.4 percent in its biggest depreciation since May and bond yields climbed as high as 18 basis points in intraday trade yesterday as tension escalated. Deputy premier Besir Atalay said Syria has conveyed regrets and assurances to United Nations officials that such an incident won’t be repeated. “Turkey’s message has been received,” Foreign Minister Ahmet Davutoglu said.

“The bond yields had made a movement on the pretext of tensions with Syria and they are now recovering because it was understood that this would not be a permanent problem,” Bora Tamer Yilmaz, a vice president at Halk Securities in Istanbul, said in e-mailed comments.

Turkey’s central bank lent 6.5 billion liras ($3.6 billion) in its one-week repo auction at the lowest 5.75 percent policy rate today. The bank has cut the average cost of funding to 5.75 percent as of Oct. 4, the least since November 2011, by providing liquidity at the lowest rate since June 4.

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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