Lira Weakens as Turkish Yields Climb on Sixth Day of Protests

The lira weakened and bond yields rose as anti-government demonstrations in Turkey continued for a sixth day. Shares slid, with Akbank TAS among the decliners as Bank of America Merrill Lynch cut the lender to underperform.

Markets swung to negative after a record rally in two-year bonds yesterday followed the biggest plunge a day earlier. Protesters accusing Prime Minister Recep Tayyip Erdogan of autocratic governance and citing grievances, including alleged police brutality and curbs on alcohol sales, clashed overnight with police, who responded with tear gas and water cannons in about 10 cities.

While statements from Erdogan’s administration helped ease market concerns yesterday, “protests against the government haven’t come to an end” and so “investors remain cautious,” Pinar Uslu, a private banking strategist at ING Bank in Istanbul, said in e-mailed comments today.

The lira weakened 0.4 percent against the dollar to 1.8846 at 5:43 p.m. in Istanbul. Yields on two-year benchmark bonds rose 29 basis points to 6.32 percent, a day after they fell 75 basis points, the most in percentage terms since Bloomberg began compiling the data in 2005.

Turkey’s central bank relaxed monetary tightening today, providing 1 billion liras ($532 million) in its daily one-week repo auctions, the same amount it offered a week ago. The bank had tightened lending to banks in the last three days.

The Borsa Istanbul National 100 Index dropped 1.4 percent to 79,636.79. Akbank tumbled 1.6 percent after BofA cut the lender part-owned by Citigroup Inc. to underperform from neutral in a report today. Turkiye Is Bankasi slid 2.8 percent as BofA cut the lender known as Isbank to neutral from buy.

Selling Pressure

The MSCI Emerging Markets Index lost 0.5 percent today on investor speculation an improving U.S. economy will encourage the Federal Reserve to taper financial stimulus measures.

“The events in Turkey overlapped with the heightened selling pressure abroad and we can see very sharp movements in an environment of low liquidity,” Erkin Isik, a fixed-income strategist at Turk Ekonomi Bankasi AS in Istanbul, said in e-mailed comments.

Two of Turkey’s main labor groups, Kesk and Disk, joined protests against the government in center of Turkey’s two biggest cities as arrest warrants were issued for dozens of people charged with spreading false information on social media about the past week’s demonstrations.

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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