Turkey Bond Yields Climb Amid Weakening Lira on Corruption Probe

Turkey’s bond yields rose and the lira weakened for a second day after police detained dozens, including the top executive of the nation’s largest listed bank, as part of a graft probe.

Yields on two-year benchmark notes rose 26 basis points, or 0.26 percentage point, to 9.36 percent by 4:41 p.m. in Istanbul, heading for the biggest jump in more than five weeks. The lira weakened 0.4 percent to 2.0428 against the dollar, the third-worst performer among 24 emerging-market currencies monitored by Bloomberg, after the Brazilian real and Thailand’s baht.

Suleyman Aslan, chief executive of state-run Turkiye Halk Bankasi AS (HALKB) and Ali Agaoglu, chairman of Agaoglu Group, a construction and energy company, are among the 84 under police custody in Istanbul a day after raids started, according to Hurriyet newspaper. Murat Kurum, chief executive of Emlak Konut Gayrimenkul Yatirim Ortakligi AS (EKGYO), Turkey’s biggest real-estate developer, was “called in” to the Istanbul Police Department, the company said yesterday.

“The story of Turkey’s political stability is, unfortunately, down the tubes,” Can Oksun, head of institutional sales and strategy at Ceros Securities in Istanbul, said in e-mailed comments today. “Talking about Fed tapering under these conditions is like playing the fiddle when the Titanic is sinking.”

Sons of at least two cabinet ministers are also being held by the police, the state-run Anatolia news agency said yesterday.

The Borsa Istanbul National 100 Index (XU100) fell as much as 3.9 percent before trading 0.1 percent higher. The shares of Halkbank, as the lender is known, dropped 2.2 percent, extending its two-day slump to 14 percent, the most over such a period since August 2011. Emlak Konut retreated 4.3 percent to the lowest level since June 2012.

The U.S. Federal Reserve will probably begin cutting its $85 billion of monthly bond purchases this week, according to 34 percent of economists in a Dec. 6 Bloomberg survey, up from 17 percent in a Nov. 8 poll. The Fed will release a statement and hold a press conference after its two-day monetary policy meeting ends today.

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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