Turkish Bond Yields Slide After Inflation Lower Than Expected

Turkish bond yields declined after the inflation rate in March was lower than economists anticipated, staying unchanged from the previous month at 10.4 percent.

Yields on two-year benchmark debt fell four basis points, or 0.04 percentage point, to 9.34 percent at 5:15 p.m. in Istanbul. The lira was little changed at 1.7780 per dollar.

“This lower-than-expected inflation is positive,” Ali Cakiroglu, strategist at HSBC Private Bank in Istanbul, said in an e-mailed report to clients. “The benchmark bond yield may slide toward 9.2 percent and it looks possible that the lira will advance to 1.77 today.”

Yields dropped 167 basis points this year, the biggest decline in emerging markets, on speculation the inflation rate will slow toward the central bank’s year-end forecast of 6.5 percent from a three-year high of 10.6 percent in January. The bank says it expects inflation to drop starting from May.

The inflation rate was forecast at 10.6 percent, according to the median estimate of nine analysts in a Bloomberg survey. The central bank’s preferred measure for core inflation fell to an annual 7.9 percent from 8.1 percent in February, the statistics office said on its website today.

“Core inflation is now moderating, following the script laid down by the central bank,” Tatha Ghose, emerging-market economist at Commerzbank AG in London, said in an e-mailed response to questions. “Producer price trends are a positive lead signal.”

Producer prices fell to an annual 8.2 percent, the lowest since April last year, from 9.2 percent in February.

The lira’s 18 percent drop last year, the most among major currencies, had helped push prices up. The currency has pared some of the depreciation this year, appreciating 6.3 percent.

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