Turkish Yields Drop to Record as Central Bank Raises Funds

Turkish benchmark bond yields fell for a third day to their lowest level on record as the central bank increased the amount of funding it gives to lenders after cutting interest rates earlier this week.

Yields on two-year benchmark debt declined four basis points, or 0.04 percentage point, to 5.53 percent at 3:54 p.m. in Istanbul, the lowest level on a closing basis for similar maturities since at least 2005 when Bloomberg started tracking the data. The lira advanced 0.3 percent to 1.7951 per dollar.

Turkey’s central bank provided 1.5 billion liras ($835 million) at 5 percent in its one-week repurchase agreement auction, triple the amount it provided on the same day last week. The overnight cost of borrowing in the interbank market fell for a fourth day to 4.79 percent, the lowest in a week.

The yield declines are “related to the repo,” Ugur Kucuk, a fixed-income strategist at Is Securities in Istanbul, said in e-mailed comments. “As the central bank eases the liquidity, the short- and medium-term rates should approach 5 percent level.”

The central bank cut its benchmark interest rate by a more-than-expected 50 basis points on April 16 and trimmed overnight lending and borrowing rates by 50 basis points on an increase in capital inflows. Yields on benchmark lira bonds fell 20 basis points this week.

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