Turkish Yields Drop Most in a Year on Excess Demand at Debt Sale

Turkey’s bond yields dropped the most in almost a year as excess demand at debt auctions yesterday spilled over to trading.

Yields on benchmark two-year notes fell 23 basis points, or 0.23 percentage point, to 5.89 percent at the close in Istanbul, its biggest decrease since Jan. 26, 2012. The lira gained 0.1 percent against the dollar to 1.7771 in its fourth day of advances.

Demand was 7.4 times the amount of January 2015 lira debt available for sale, central bank data showed yesterday. Primary dealers’ bids exceeded the debt on offer by 50 times in non-competitive sales of the new benchmark notes and 13 times for September 2022 fixed-coupon bonds.

“Participation of foreign investors was strong in yesterday’s auctions,” Selim Gulkan, a fixed-income trader at Turk Ekonomi Bankasi AS in Istanbul, said in e-mailed comments. “Some bids that could not be covered yesterday shifted to the secondary debt market.”

The Treasury sold $1.5 billion of 2023 dollar bonds yesterday at a record-low yield of 3.47 percent. Demand was more than twice the amount offered, the Treasury said today.

Turkey plans to auction 34.6 billion liras of debt this quarter, up 89 percent from the last three months of 2012. Yields on two-year benchmark notes dropped 483 basis points last year, the biggest retreat among 20 emerging markets, as foreign investors bought a record $16.2 billion of the country’s bonds.

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