Turkish Bond Yields at Lowest in 15 Weeks on Inflation Peak Bets

Turkish bonds rose, pushing yields to the lowest in 3 1/2 months on speculation inflation has peaked at 10.6 percent in January.

Yields on the benchmark two-year bond fell 8 basis points, or 0.08 percentage point, to 9.29 percent at the 5:00 p.m. close in Istanbul, a Turk Ekonomi Bankasi index of the securities showed. This level of yields is the lowest since Oct. 20, increasing the week’s drop to 31 basis points. The lira strengthened 0.2 percent at 1.7536 per dollar, lifting its weekly appreciation to 1.3 percent.

Annualised inflation rose to 10.6 percent in January, the highest since November 2008, after the monthly figure increased by 0.6 percent, the statistics agency based in Ankara said on its website today. The median estimate of seven economists in a Bloomberg survey was for 10.5 percent, the level price increases reached in December.

“Turkish inflation is likely to have peaked at 10.6 percent,” Tevfik Aksoy, London-based chief economist for the region at Morgan Stanley & Co., said in an e-mailed note, citing the lira’s gains this year, which rose 7.9 percent against the dollar.

The lira slumped 18 percent in the biggest decline worldwide and yields soared 390 basis points last year as a widening current-account deficit and worries about the European debt crisis and Middle East revolts shook investor confidence in Turkey.

“We continue to expect year-on-year headline inflation to drop as of April, May,” Simon Quijano-Evans, London-based economist at ING Groep NV, said in e-mailed comments.

The Turkish central bank expects inflation to slow to 6.5 percent this year, Governor Erdem Basci said at a news conference this week.

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