Turkish bonds rose for the first time in four days on bets the central bank will continue lending at the lowest policy rate as long as the lira outperforms its emerging-market peers.
The yield on benchmark two-year debt fell seven basis points, or 0.07 percentage point, to 9.53 percent at the close in Istanbul, the biggest decline in almost a week. The lira appreciated for the first time in four days and traded 0.4 percent stronger at 1.8179 per dollar.
Yields reached the highest level since March 23 yesterday after the central bank cut the funding it provides to lenders at the lowest policy rate by half as the lira slumped to the weakest level since Jan. 20.
“Yields on short-term debt are falling because people think the central bank will continue to fund at 5.75 percent as the lira is trading better than other markets,” Onur Bayol, a fixed-income trader at Denizbank TAS, said in e-mailed comments.
Against the dollar, the lira fared better than the Russian ruble, Czech koruna, South African rand, Polish zloty and Hungarian forint over the past five days, according to data compiled by Bloomberg.
The Turkish central bank varies the funding rate on a daily basis, maintaining borrowing costs within a 5.75 percent to 11.5 percent interest-rate corridor introduced last year. It resumed lending at its lowest policy rate two days ago after refraining from funding at this rate since May 3.
“Foreigners see the increase in yields as a buying opportunity,” Sercan Kiliclar, a fixed-income trader at Akbank TAS, said in e-mailed comments.
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