Turkish two-year bond yields rose for a third day on bets that stronger economic growth reduces the chances of further interest-rate cuts.
Yields on benchmark debt rose 10 basis points, or 0.1 percentage point, to 6.01 percent at the 5 p.m. close in Istanbul, the highest since Nov. 28. The lira lost 0.1 percent against the dollar at 1.7862, a second day of declines.
The central bank, led by Governor Erdem Basci, kept the bottom end of its so-called rates corridor unchanged at 5 percent two days ago. The median estimate of seven economists surveyed by Bloomberg was for a 25 basis-point cut. Basci maintained the overnight lending rate at 9 percent and lowered the one-week repurchase rate by 25 basis points to 5.5 percent, in line with estimates. Turkey’s economy may grow more than 4 percent next year, Finance Minister Mehmet Simsek said in an interview with CBNC-e television today.
“We understand that the central bank plans no further policy rate cuts going forward,” Ata Invest Securities chief economist Ozlem Derici and head of research Cemal Demirtas wrote in an e-mailed statement today after Turkey’s central bank met bank economists in Ankara yesterday. The meeting was closed to the press.
“The central bank stated that a sharp increase in domestic demand is in the making considering the growth indicators such as PMI, consumer confidence and credits,” Ata Invest said.
The consumer confidence index rose to 89.18 in November from 85.73 in October, according to the Statistics Office in Ankara on Dec. 17. Turkey may see loan growth above 15 percent, nearing 20 percent next year, Adnan Bali, CEO of Turkiye Is Bankasi AS, said in an interview on CNBC-e television Dec. 18.
“The central bank’s rate cut was less than expected and traders are closing positions because of the end of the year,” Onur Bayol, a fixed-income and currency trader at Denizbank AS in Istanbul, said in e-mailed comments today.
The central bank has driven down the average cost of funding for banks to 5.58 percent on Dec. 19, down from 11.93 percent on Jan. 6, helping the benchmark bond yields fall 500 basis points this year in the biggest rally globally.
The lira gained 5.9 percent this year, the third-biggest appreciation among 10 emerging markets in Europe, the Middle East and Africa after the Hungarian forint and the Polish zloty.