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Turkish Bond Rally Beats European Peers in Quarter of Rate Cuts

  • Yield on 5-year government bond falls most in EM after Brazil
  • Turkey central bank cut borrowing costs by 175bps since March

Turkey’s sovereign bonds gained for a third quarter as the central bank cut borrowing costs and turmoil after the U.K. voted to leave the European Union left traders betting tighter U.S. policy now lies far in the future.

The yield on Turkish five-year debt fell 80 basis points this quarter, making it the best-performing sovereign bond in emerging markets after Brazil. Foreign investors poured a net $275 million into Turkey’s bond market over the past three months, shrugging off political turbulence that saw the prime minister resign in May. The lira has fared less well, heading for its first quarterly loss in three.