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Turkey Bond Yields Drop Most on Record as Stocks, Lira Rebound

Turkey’s bonds rebounded, sending yields plunging the most on record, while the lira and stocks surged a day after nationwide protests against Prime Minister Recep Tayyip Erdogan trigered a market rout.

The yield on two-year lira notes tumbled the most in at least eight years in percentage terms, plunging 67 basis points to 6.11 percent at 10:53 a.m. in Istanbul. Yields surged 71 basis points yesterday, the biggest one-day jump since Bloomberg began compiling the data. Turkey’s benchmark stock index rose 4 percent, its biggest advance in more than 16 months, after a 10 percent loss that was the steepest in a decade yesterday.

The protests continued in Turkish cities including Istanbul and Ankara last night as Erdogan flew to Morocco, the first stop of a three-day regional tour. Deputy Prime Minister Bulent Arinc is scheduled to hold a press conference in the capital at 12:00 p.m. today, after he meets President Abdullah Gul.

“Hopefully, statements that would calm the people will come at today’s press conference,” Ismail Erdem, the chief executive of Taaleri Wealth Management in Istanbul, said in a phone interview. “The protests are going on but at least they have not escalated overnight. This helps calm down the markets.”

The lira rebounded from a 17-month low, gaining 0.4 percent to 1.8745 per dollar and snapping a five-day losing streak.

Turkiye Garanti Bankasi AS (GARAN), the nation’s biggest lender, led index gains with a 4.8 percent advance, after slumping the most in nine years yesterday.

Unrest

Political concerns will be “transitory,” David Aserkoff, an equity analyst at JPMorgan Chase & Co. in London, said in a report e-mailed today. He maintains an overweight rating on Turkish stocks.

Turkey’s unrest, which began on May 31, was sparked by police tear-gassing a park in central Istanbul occupied by people who opposed plans to tear it down for a redevelopment project. By June 1, tens of thousands had poured into the Taksim Square as demonstrations spread to other cities.

“Depending on statements from Arinc, equities may rise further; we may see two-year yields dropping to below 6 percent,” Taaleri’s Erdem said. If the “global market weakness” fueled by concern the U.S. Federal Reserve will scale down its monthly asset purchases subsides, Turkey would “continue to perform well,” he said.

To contact the reporter on this story: Taylan Bilgic in Istanbul at tbilgic2@bloomberg.net

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

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