Yields Fall After Turkey Trade Deficit Beats Estimates

The Turkish lira gained and bond yields fell after better-than-expected trade data eased concerns that the current-account deficit would expand rapidly as domestic demand rebounds.

The lira gained less than 0.1 percent to 1.8095 at 2:30 p.m. in Istanbul today, reversing earlier losses of as much as 0.2 percent before the data was published. Yields on two-year bonds dropped two basis points to 6.32 percent.

The trade deficit was $6.96 billion in February, beating all estimates in a Bloomberg survey. The median estimate among six economists in the survey predicted an $8.8 billion shortfall. Exports rose 5.8 percent to $12.4 billion in the month compared with February last year, while imports climbed 9 percent to $19.4 billion.

“The lower-than-expected trade deficit will be perceived well by the market as it indicates that the widening in the current-account deficit isn’t going to be as rapid as feared,” Burcu Unuvar, an economist at Is Yatirim Menkul Degerler in Istanbul, said in an e-mailed report. The data will also support expectations for another upgrade, she said.

Standard & Poor’s on March 27 rasied Turkey’s credit rating to BB+, bringing its rating in line with that of Moody’s Investors Service at one level below investment grade. Fitch Ratings raised Turkey to investment grade in November.

Turkey’s current-account deficit at $49 billion was the world’s third-largest last year and was the second-largest in the world in 2011, trailing only the United States, S&P said in a statement yesterday. The decline in the deficit “is likely to reverse in 2013” as gold exports decline and domestic credit growth accelerates, it said.

Turkish bank loans expanded 19.9 percent in the 12 months to March 15, above the central bank’s year-end target of 15 percent, according to data released by the banking regulator on March 25.

Turkey exported $837 million in semi-precious and precious metals and stones in February, according to the data released by the state statistics office in Ankara today. That compares with exports of $725 million in February of 2012.

The increase in Turkey’s gold exports, which began last year, boosting exports and narrowing the current-account deficit, “was largely related to Iran’s increasing use of gold as a medium of exchange to get around international sanctions,” S&P’s statement yesterday said.

(Corrects trade deficit figure in third paragraph.)