Turkey Yields Weaken as Bank Extends Lowest Rate for a 9th Day

Turkish bond yields fell for a second day after the central bank provided liquidity at its lowest policy rate for a ninth day, extending its looser monetary policy stance.

Yields on the two-year benchmark bond retreated five basis points, or 0.05 percentage point, to 9.12 percent, lifting this month’s slide to 34 basis points and bringing the weekly drop to three basis points.

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 drop 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.

“This is an easing signal from the central bank and we are seeing the result in yields on short-term debt,” Selim Gulkan, a fixed-income trader at Turk Ekonomi Bankasi AS in Istanbul, said by telephone.

The central bank provided 5 billion liras today for the first time this week, the most it can offer on a daily basis in its one-week repurchase agreements auction. It provided 1 billion liras in the past three days, the least it can lend every day. The Ankara-based bank lent 4 billion liras in its one-month repo sale conducted once a week on Friday.

The lira weakened less than 0.1 percent to 1.8164 per dollar for the first time in four days, paring its rise this week to 0.3 percent. It added less than 0.1 percent to 2.29 per euro, raising this year’s gain versus the euro to 7 percent.

Lira Versus Euro

The lira advanced against the euro while its eastern European peers lagged because “it is seen as a safer alternative to those countries which are closer to the Eurozone,” Philip Roberts, chief European technical strategist at Barclays Capital, said in e-mailed comments.

Turkey’s exports to the EU fell 17.8 percent in April to $4.77 billion, cutting the region’s share in the country’s exports to 37.6 percent from 48.9 percent a year earlier.

The Turkish currency may be poised for further gains against the euro after the pair closed below the so-called “cloud” on its weekly ichimoku chart for the first time in 18 months, according to a Barclays report published June 14. “EUR/TRY cloud break confirms downside extension toward 2.15/2.16,” according to the report.

Ichimoku analysis is used to predict a currency’s direction through analyzing the midpoints of historical highs and lows. The cloud refers to the area between the first and second leading span lines on the chart and is used to show an area where buy orders may be clustered.

“Momentum is less than 50 -- relative strength index -- but is not at extreme levels so it supports a more negative outlook,” Roberts said.

Relative strength indexes show how rapidly prices have advanced or dropped during a specified time period. Readings above 70 indicate a price may be poised to fall, and readings below 30 indicate it may be poised to rise.

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