Bond yields in Turkey rose for the first time in five days, jumping the most in almost 11 weeks, and the lira weakened after Syrian forces shot down the country’s warplane, escalating tensions.
The yield on two-year benchmark debt advanced 12 basis points, or 0.12 percentage point, to 8.92 percent at the close in Istanbul, the biggest rise since April 10. The lira depreciated for a third day, down 0.4 percent to 1.8226 per dollar, paring this year’s gain versus the dollar to 3.8 percent. The currency’s three-day stretch of declines is its longest losing streak since May 18.
The shooting has heightened tensions that have arisen in the past year over Syrian President Bashar al-Assad’s crackdown on anti-government protesters, which has left more than 10,000 people dead. Turkey is still weighing a response, Turkish Foreign Minister Ahmet Davutoglu said on state television yesterday. Syria has criticized Turkey for hosting meetings of opposition groups, while Turkey has called for a change of regime in its southern neighbor.
“This is a major development and we will see selling until it becomes clear how this will be resolved and the uncertainty is ended,” Onur Bayol, a currency and fixed-income trader at Denizbank AS in Istanbul, said in e-mailed comments.
Prime Minister Recep Tayyip Erdogan will lead a cabinet meeting in Ankara today and the North Atlantic Treaty Organization will meet on June 26 at Turkey’s request to discuss the incident.
“We need to wait until Tuesday when Turkey discusses a possible reaction with NATO allies,” Felix Herrmann, an analyst at DZ Bank AG in Frankfurt, said in e-mailed comments. “But for sure, downside risks for the lira have risen.”
The lira will probably weaken to 1.89 per dollar by the end of the year, currency forwards showed. Lira futures signal the currency will slide to 1.85 per dollar in August.