Turkey Yields Jump to 3-Year High as Core Inflation Accelerates

Turkish debt yields rose to the highest in more than three years as government data showed core inflation accelerated in August. The lira weakened as regional tensions continued.

Yields on 10-year bonds swelled as much as 29 basis points to 10.33 percent, set for their highest level since June 2010, and traded 22 basis points higher at 10.04 percent at 12:45 p.m. in Istanbul. The lira depreciated 1.2 percent to 2.0449 per dollar, extending its losses in the past month to 5.2 percent, the most among major emerging markets in Europe, the Middle East and Africa.

Consumer-price (TUCPIY) gains ebbed to 8.17 percent last month from 8.88 percent in July, the highest level in almost a year, according to data from the statistics office in Ankara today. Core inflation accelerated to 6.37 percent from 6.09 percent in the previous month.

“Core inflation looks bad and this spurred selling in long-term maturities,” Bugra Bilgi, a hedge fund manager at Garanti Asset Management in Istanbul, wrote in e-mailed comments. “The central bank said it would announce a plan and there were people who were buying liras for that reason but there has been no announcement,” Bilgi said.

Turkey’s central bank declared Sept. 9 an “extra tightening” day, when it provides no funding at its cheapest lending rate of 4.5 percent. It said it would sell a minimum $100 million for liras that day. Governor Erdem Basci said last week the central bank promised “surprise” tools to defend the lira, which weakened to a record of 2.0730 per dollar on Aug. 28.

Russia detected missiles launched toward the eastern Mediterranean, RIA Novosti reported, citing comments by Defense Minister Sergei Shoigu to President Vladimir Putin.

“It looks that there will not be a relaxation in the currency market,” Onur Bayol, a trader at Denizbank AS (DENIZ) in Istanbul, wrote in e-mailed comments. “The dollar is still strong in the international markets and Syria risks are continuing.”

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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