Turkey Stocks Jump Led by Banks as Fed Rate Signal Boosts BondsConstantine Courcoulas
Turkish stocks jumped the most in five weeks and government bonds rose after the Federal Reserve signaled it will raise interest rates more slowly than previously forecast, boosting demand for riskier assets.
The Borsa Istanbul 100 Index rose 2.5 percent to the highest since March 6 after Fed Chair Janet Yellen suggested policy makers were in no hurry to increase borrowing costs. The yield on the benchmark two-year bond fell 27 basis points to 8.49 percent, the lowest since March 4.
“Yellen’s dovish commentary is just what the doctor ordered for emerging-market assets,” Isik Okte, a strategist at Teb Investment in Istanbul, said in an e-mailed note. “Turkish assets, led by inflows to fixed-income benchmarks, are going to be outperformers among emerging-market assets today.”
The lira fell to a record this month as prospects for higher U.S. rates heightened concern over the vulnerability of Turkish assets amid government calls for lower domestic borrowing costs. A meeting between central bank Governor Erdem Basci and President Recep Tayyip Erdogan last week spurred optimism politicians will tone down their calls and help slow the lira’s depreciation in 2015.
The lira surged 1.7 percent following the Fed announcement on Wednesday, the most since March 2014. It weakened 1.4 percent to 2.6061 per dollar at 5:47 p.m. in Istanbul.
Turkiye Garanti Bankasi AS, the nation’s largest publicly-traded lender, rose 6 percent in the steepest advance this year. Akbank TAS added 5.1 percent.
There’s an “overall sense of relief for most assets, perhaps tempered a bit on the currency side by questions about a possible rate cut,” Murat Gulkan, a managing director at Unlu Portfoy in Istanbul, said by e-mail.
Policy makers, who reduced all three of Turkey’s interest rates last month, left them unchanged on Tuesday, citing the need for cautious monetary policy amid uncertainty in global markets and elevated food prices.
The central bank lowered the key rate to 7.5 percent in five moves since more than doubling it to 10 percent in January 2014 to shore up the lira.