Turkish bonds down, shares rise

Turkish bond yields ended higher on Friday as investors squared positions ahead of the weekend as a precaution against any possible downgrade in credit ratings for troubled eurozone sovereign debtors. The lira closed slightly weaker, despite the central bank selling fewer dollars at auction than it had announced it was offering.
The benchmark May 15, 2013 bond yield closed at 8.15 percent, up from 8.09 percent on Thursday. The yield dropped to 8.07 percent in morning trade after five major central banks acted to boost liquidity for European banks, to help soothe market nerves over commercial banks' exposure to the eurozone sovereign debtors.
While the central banks' move helped calm some fears, traders said that investors didn't want to take risks over the weekend. "Investors feel more worried about a possible rating downgrade over the weekend. They don't want to carry positions, so they sell. We also saw some profit taking today which also increased bond yields," said a fund manager of a portfolio company based in Istanbul.
The lira closed at 1.7840 versus the dollar on the interbank market versus a previous close of 1.7790, as the market got over its surprise on Thursday, when the central bank failed to hold a forex selling auction for the first time since August 5. On Friday, the bank held an auction, but only sold $70 million, below the maximum $100 million it said it would offer.
"The fact that the central bank sold less dollars than announced earlier also didn't affected the currency much. I expect the lira to start the next week with a strengthening trend," said Tufan Comert, strategist at Garanti Securities. "Decisions from next week's monetary policy meeting will be determinant for the lira. We don't expect the central bank to change its policy rate, which should be positive for the currency," Comert added.
The central bank monetary committee meets on September 20. The main Istanbul share index closed up 1.37 percent ato 57,896.50 points, in line with an emerging markets index which was up 1.27 percent. Turkish markets did not react to a consumer confidence index, which eased to 91.74 points in August, released by the Turkish Statistics Institute on Friday.