Turkish Bond Yields Drop Most on Record as Stocks, Lira Rebound

Turkey’s bonds rebounded, with yields plunging the most on record, while the lira and stocks surged as Deputy Prime Minister Bulent Arinc apologized to the victims of excessive police force against protesters.

The yield on two-year lira notes tumbled the most in at least eight years in percentage terms, down 75 basis points to 6.03 percent at the 5 p.m. close in Istanbul. Yields surged 71 basis points yesterday, the biggest jump since Bloomberg began compiling the data. Turkey’s benchmark stock index rose 4.9 percent, its biggest advance since September 2011, after a 10 percent loss that was the steepest in a decade yesterday.

“Excessive use of force” against protesters was “wrong,” Arinc told reporters at a press conference in Ankara after meeting President Abdullah Gul today. The public’s reaction against plans to redevelop a park in Istanbul’s Taksim Square was “rightful and legitimate,” he said. Arinc is standing in for Prime Minister Recep Tayyip Erdogan, who left for a three-day scheduled trip to North Africa yesterday.

“This statement will soothe the climate -- every section of the society would appreciate these words,” Ismail Erdem, the chief executive of Taaleri Wealth Management in Istanbul, said in a phone interview. “Hopefully, the prime minister will continue with the same tone after he arrives.”

The lira rebounded from a 17-month low, gaining 0.5 percent to 1.8742 per dollar at 6:16 p.m. and snapping a five-day losing streak.

Turkiye Garanti Bankasi AS, the nation’s biggest lender, led index gains with a 5.5 percent advance, after slumping the most in nine years yesterday. Akbank TAS, the lender part-owned by Citigroup Inc., rose 5.2 percent, while Turkiye Is Bankasi AS, Turkey’s biggest bank by assets, added 4.2 percent.

Unrest

Political concerns will be “transitory,” David Aserkoff, an equity analyst at JPMorgan Chase & Co. in London, said in a report e-mailed today. He maintained an overweight rating on Turkish stocks.

Turkey’s unrest, which began on May 31, was sparked by police tear-gassing a park in central Istanbul occupied by people who opposed plans for its redevelopment. By June 1, tens of thousands had poured into the Taksim Square as demonstrations spread to other cities.

“Today we’ll probably witness more subdued protests,” Taaleri’s Erdem said. “Two-year yields won back yesterday’s losses. I’d expect equities to catch up in a few days or weeks.”

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