Turkish Yields Rise Most in a Year as Inflation Disappoints

Turkish yields rose the most in more than a year after inflation slowed by less than analysts expected in December.

Yields on benchmark two-year notes rose 17 basis points, or 0.17 percentage point, to 6.33 percent at the 5 p.m. close in Istanbul, the highest level since Nov. 16 and the biggest increase since Dec. 30, 2011. The lira lost 0.2 percent against the dollar to 1.7812.

Inflation slowed to 6.2 percent, the statistics office in Ankara said on its website today. The median estimate of six economists in a Bloomberg survey was for 6 percent. Prices rose 0.4 percent in the month. Turkey’s central bank is targeting 5 percent inflation this year after missing its goal for the past two years.

“Today’s inflation data disappointed a bit and we need to look at forthcoming prints where inflationary pressures could be on the rise again,” Cengiz Erguen, a director of local markets trading at Commerzbank AG, said in e-mailed comments from London.

The central bank in Ankara cut its benchmark interest rate to a record-low 5.5 percent on Dec. 18 after economic growth decelerated to 1.6 percent in the third quarter, the slowest pace since a 2009 recession. Governor Erdem Basci said Dec. 25 that inflation will be “very close” to its target of 5 percent in 2012 after ending 2011 with 10.5 percent inflation.

“I expect the inflation rate to remain range-bound in most of 2013 with some upside risks present coming from credit expansion and fiscal measures,” Tevfik Aksoy, chief economist for central and eastern Europe, the Middle East and Africa at Morgan Stanley in London, said in e-mailed comments, adding he was keeping his 2013 forecast unchanged at 6.3 percent.


The one-year breakeven rate, a gauge of investor inflation expectations that shows the yield gap between fixed-rate bonds and those indexed to consumer prices, advanced for a second day to 5.99 percent.

The lira appreciated 6 percent last year, the third-largest gain in emerging Europe after the Polish zloty and the Hungarian forint. Yields on two-year benchmark lira bonds fell 483 basis points in 2012, the biggest annual drop since 2009.

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