Turkey Yields Fall as Lower Rate Extended to 8th Day; Lira Rises

Turkish yields fell for the first time in three days after the central bank provided funding at its lowest policy rate for an eighth day, reducing borrowing costs for lenders.

The yield on benchmark two-year bonds declined two basis points, or 0.02 percentage point, to 9.16 percent, at the close in Istanbul. The lira strengthened for a third day, gaining 0.2 percent to 1.8165.

The central bank has lent at its so-called “normal” rate -- its benchmark of 5.75 percent -- every day since June 5, after inflation fell to 8.3 percent in May from 11.1 percent in April, the biggest slide since January 2003. On May 31, Turkey announced its trade deficit for April narrowed more than expected, contracting for a sixth month and beating analyst estimates. Its current-account deficit retreated in April for a sixth month, the central bank said June 11.

“The central bank is pressing ahead with normal days for eight days and banks have not used 11 percent overnight borrowing facility for the past two days,” Erkin Isik, a fixed-income strategist at Turk Ekonomi Bankasi AS in Istanbul, said in e-mailed comments.

The central bank varies its funding rate on a daily basis, maintaining borrowing costs within a 5.75 percent to 11.5 percent interest-rate corridor introduced last year. Days when it lends at the lowest rate are termed “normal.”

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