Turkish Bonds Rise With Stocks as Fed Odds Boost Risk Appetite

  • Lira appreciates as emerging-market currencies rally
  • Optimism seen persisting all week barring negative news

Turkish bonds climbed the most in more than five months and stocks jumped to a seven-week high as reduced bets the Federal Reserve will increase interest rates boosted investor appetite in the country’s assets.

The yield on two-year government bonds, the worst performing emerging-market debt this year, fell 28 basis points, the most since April, to 11.13 percent. The Borsa Istanbul 100 Index advanced 3.4 percent to the highest level since Aug. 17 after data on Friday showed American employers added a fewer-than-expected number of workers to payrolls in September. The lira advanced against the dollar.

Concern the Fed will raise borrowing costs this year and an economic slowdown in China had curbed demand for riskier assets, in turning helping fuel a sell-off in Turkish assets, with bond yields climbing more than 300 basis points this year. The nation has also been rocked by political turmoil as it prepares for the second parliamentary elections in six months and by escalating tension between the government and autonomy-seeking Kurdish rebels. Futures traders pushed back the odds of a Fed liftoff to March on Monday, compared with bets of an increase in January on Thursday.

“I expect this optimism to keep the mood high throughout this week, unless there is a big newsflow of negative developments,” Burak Demircioglu, a trader at Istanbul-based Burgan Yatirim Menkul Degerler AS, said by e-mail.

CPI Data

Stocks and bonds rose even after inflation data for September came in higher than expected. Consumer prices advanced for a second month to 7.95 percent, according to data from the statistics agency in Ankara. The median of 17 estimates in a Bloomberg survey anticipated inflation at 7.70 percent.

Lenders led the stock advance with Akbank TAS and Turkiye Garanti Bankasi AS, the nation’s largest publicly traded banks, climbing 5.6 percent and 3.8 percent, respectively.

The lira gained 0.1 percent to 2.9871 per dollar at 5:44 p.m. in Istanbul after climbing 1.2 percent on Friday. That compares with an increase of 0.8 percent for a gauge tracking 20 developing-country currencies.

“Emerging markets have recovered significantly after weak U.S. data, but the lira is benefiting less due to ongoing local uncertainties,” Erkin Isik, a strategist at Turk Ekonomi Bankasi AS in Istanbul, said by e-mail.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE