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Turkish lira steady, bond yields near record low

liraISTANBUL: The Turkish lira was steady on Wednesday while bond yields hovered near record lows, with inflation concerns easing and investors hoping for another interest rate cut next month.


By 0917 GMT, the lira was flat at 1.7925 to the dollar and at 2.0545 against its euro-dollar basket.


The yield on the two-year benchmark bond stood at 6.05 percent, unchanged from its previous close.


The central bank said on Tuesday inflation was expected to fall to its target of 5 percent in 2013, fuelling hopes of a rate cut at its next policy meeting on Dec. 18, and helping keep the yield near an all-time low of 6 percent.


"Economic indicators signal no immediate pick up in domestic demand, which translates into diminishing inflationary pressures," analysts at Is Investment said in a note, adding that bonds yields were already pricing in a rate cut.


They said expectations of another ratings upgrade for Turkey in the first half of next year were also supporting bond prices.


Fitch upgraded Turkey to investment grade early in November, although fellow ratings agency Moody's kept it one notch below investment grade in an annual review, saying its balance of payments left it vulnerable to shocks.


Turkey needs at least one of Moody's or Standard & Poors to follow Fitch's lead before it can join benchmark investment grade bond indexes, a status that many funds require before investing in a country.


Istanbul's main share index was up 0.18 percent at 72,125 points, outperforming a 0.52 percent fall in the global emerging markets index.


Copyright Reuters, 2012


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