Turkish Yields Fall as Stimulus Bets Outweigh Deficit Concern

Turkey’s bond yields fell as the U.S. Federal Reserve and the European Central Bank signaled they will maintain stimulus measures, outweighing concern about a bigger than expected trade deficit at home.

The two-year benchmark notes extended their drop this month as ECB President Mario Draghi signaled late yesterday the bank has no intention of tightening monetary policy anytime soon with inflation projected to “significantly” undershoot its 2 percent target next year. Federal Reserve Chairman Ben S. Bernanke yesterday said stimulus has helped reduce U.S. borrowing costs and spur growth. Turkey’s trade deficit in January widened more than economists’ estimated.

“The expectation that the global liquidity will continue to remain abundant is driving down yields,” Selim Gulkan, a fixed-income trader at Turk Ekonomi Bankasi AS (TEBNK), said in e-mailed comments today. “The deficit is only slightly higher than estimates and made no big impact.”

Yields on benchmark notes slid two basis points, or 0.02 percentage point, to 5.68 percent at the 5 p.m. close in Istanbul, bringing their decline this month to 17 basis points. The lira was little changed at 1.7970 a dollar, after weakening to 1.8011 in earlier trading.

Turkey’s trade gap expanded to $7.29 billion from $7.01 billion a year earlier, exceeding the $7.1 billion median of nine estimates compiled by Bloomberg.

The yield on 10-year bonds fell for a third day, slipping seven basis points to 6.81 percent, their lowest close since Feb. 1.

“The probability of a sharp rise in U.S. interest rates is slim in the short term and this caused buying in our longer-maturity bonds,” Ugur Kucuk, a fixed-income strategist at Is Investment Securities in Istanbul, said in e-mailed comments.

To contact the reporter on this story: Selcuk Gokoluk in Istanbul at sgokoluk@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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