Turkish Notes Snap Seven-Day Gain as Inflation Spurs Rate Bets

Turkish bonds fell, ending the longest streak of gains in 11 months, as a report showing faster-than-expected inflation spurred bets the central bank may raise interest rates. The lira declined.

Two-year note yields rose 20 basis points to 10.72 percent at the 5 p.m. close in Istanbul, the first gain in eight days, after yesterday dropping to the lowest since Jan. 23. The lira weakened 0.2 percent to 2.1327 per dollar.

Consumer-price growth accelerated to 8.4 percent in March, the highest since July, from 7.9 percent in February, data from the state-run statistics agency showed today. That’s above the

8.1 percent median estimate of 12 analysts in a Bloomberg survey. Economists predict the trend may continue as an unusually dry winter fuels food inflation. The central bank raised interest rates in January to shore up the lira.

“We expect core inflation figures to continue trending upward through the first half of the year,” Gokce Celik, an Istanbul-based economist at Finansbank AS, said in an e-mailed note today. While the March data may not spark policy action on its own, the risk of faster price growth “justifies our view that there is room for further interest-rate tightening,” he said.

The central bank said last month that it expects inflation to continue to gather pace until June. The lira, which Governor Erdem Basci blamed for missing his 2013 inflation target of 5 percent, has appreciated 5.6 percent since he unexpectedly doubled the benchmark interest rate on Jan. 28, yet remains 15 percent weaker in the past 12 months.

“The expectation of supportive measures from the central bank on reserve requirements and banks is emerging,” Emre Balkeser, head of trading at Garanti Securities in Istanbul, said in an e-mail.

The Borsa Istanbul 100 index climbed 1.3 percent to 71,544.81 today, the highest close since Dec. 16, and taking its advance this year to 5.5 percent.

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