Turkish Yields Rise as China Data Outweighs Basci’s Possible Cut

Turkish bond yields climbed as slowing economic growth in China weakened risk appetite for emerging market assets, outweighing a possible interest-rate cut by the Turkish central bank tomorrow.

The yield on two-year benchmark bonds rose two basis points to 5.75 percent at the 5 p.m. close in Istanbul, paring this month’s decline to 60 basis points. The lira weakened less than 0.1 percent to 1.7886 per dollar, trimming this month’s appreciation to 1.2 percent.

The majority of 13 analysts surveyed by Bloomberg expect the central bank to reduce the benchmark interest rate and the overnight lending rate by 25 basis points. While a possible cut has already been priced in the bond market, China’s weaker-than- anticipated economic growth is weighing on investor sentiment, said Selim Gulkan, a fixed-income trader at Turk Ekonomi Bankasi AS (TEBNK) in Istanbul. China’s gross domestic product grew 7.7 percent from a year earlier, compared with an 8 percent median forecast in a Bloomberg News survey.

“Risk-taking appetite has lessened and volumes are not strong,” Istanbul-based Gulkan said by phone. “It is possible that people are taking profits.”

Central Bank Governor Erdem Basci said on April 3 that a “measured rate cut” may be in store depending on Turkey’s real effective exchange rate index. The gauge, which measures the lira against an inflation-weighted basket of currencies used by Turkey’s trading partners, rose to 119.95 in March from 119.75 in February, the central bank said April 3.

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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