ISTANBUL: The Turkish lira weakened slightly and bond yields inched up on Thursday ahead of a central bank policy meeting which is expected to ease policy further to support a slowing economy.
The central bank will release the outcome of its monthly deliberations at 1100 GMT. At its last meeting in September, it cut its overnight lending rate, the upper end of its interest rate corridor, by 150 basis points to 10 percent.
The yield on Turkey's two-year benchmark bond stood at 7.35 percent, slightly up from Wednesday's close at 7.32 percent.
Since Tuesday, the two-year yield has fallen around 15 basis points after a successful debt auction and an easier monetary policy outlook due to slowdown in recent economic indicators.
The Turkish economy was the fastest-growing in Europe last year, expanding 8.5 percent, but weaker domestic demand this year has taken its toll.
"The markets price-in a rate cut of 100 basis points. We don't expect any selling in the markets after the meeting as there's still a possibility for the bank to cut its rates further, just like the other emerging countries do," said Tufan Comert, strategist at Garanti Securities.
"The effect of the recent price hikes on the inflation would be temporary. But inflation will stay around seven percent next year. So, the yields wouldn't fall below seven percent. But there is no reason for them to increase either," Comert said.
By 0840 GMT the lira had eased to 1.8017 against the dollar , from 1.8004 late on Wednesday. Against the euro-dollar basket it stood flat at 2.0812.
Turkey's main share index was up 0.21 percent at 70,837 points, after hitting its highest level since November 2010 in early trade. The emerging markets index was up 0.37 percent.
"The index is seen... holding in positive territory for the day. Eyes (will be) on the central bank's rate decision," wrote analysts at Ekspres Invest.
Shares in Erdemir, Turkey's biggest steel maker were 1.36 percent up at 2.23 lira although the company posted a 45 percent drop in third quarter net profit to 151.7 million lira ($84.31 million).
Erdemir's results were slightly above expectations on better than anticipated operational performance, wrote analysts at Ata Invest.
Investors were also awaiting Turkey's biggest mobile phone operator Turkcell third quarter results, expected to be released after market close.
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