ISTANBUL: Turkish bond yields dropped towards record lows and the lira jumped on Monday after credit ratings agency Fitch raised the country to investment grade.
Fitch cited Turkey's moderate and declining government debt burden, sound banking system, favourable medium-term growth prospects and relatively wealthy and diverse economy.
The yield on the two-year benchmark bond fell as low as 6.8 percent, a whisker away from its all-time low of 6.79 percent hit in January 2011. By 1135 GMT it stood at
6.86 percent, compared with 6.98 percent before the Fitch news.
The lira jumped to 1.7800 to the dollar, its strongest since early August, compared with 1.7889 late on Friday. It later eased to around 1.7820.
"The majority of investors were expecting Fitch to upgrade Turkey's outlook and not the credit rating itself. Therefore, we expect a positive trend in the markets in the short term," wrote Tufan Comert, strategist at Garanti Securities.
"The lira can firm to 1.77 against the dollar and the benchmark bond yield can fall as low as 6.80 percent," Comert added.
Fitch lifted Turkey's long-term foreign currency rating to 'BBB-' from 'BB+' and its long-term local currency rating to 'BBB' from 'BB+', with stable outlooks.
Against its euro-dollar basket the lira was trading at 2.0304, after hitting its strongest since late August of 2.0284.
The main share index closed the morning session 0.55 percent up at 71,812 points, outperforming a 0.5 percent fall in the global emerging markets index. The afternoon session will start at 1220 GMT.
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