ISTANBUL: Turkish bond yields hovered near record lows on Tuesday as investors awaited exchange rate data from the central bank which is likely to boost hopes of an imminent cut in interest rates.
The yield on the two-year benchmark bond fell to 5.80 percent from a close of 5.82 percent on Monday. It hit an all-time low of 5.76 percent in intraday trade on Monday following lower-than-expected inflation data.
The central bank is due to release real exchange rate (REER) figures for November at 1230 GMT.
It has said it would act swiftly to protect the economy if the lira strengthened to 120-125 on its index, which measures the weighted average of domestic prices relative to prices of its trade partners. It stood at 117.4 in October.
"We expect the REER for November to be announced at 119, which is quite close to the central bank's intervention level of 120, and could add to the rate cut expectations," said TEB-BNP Paribas strategist Erkin Isik.
The lira rose to a three-month high in early November after credit rating agency Fitch assigned Turkey its first investment-grade rating in 18 years, prompting Central Bank Governor Erdem Basci to warn he would act if the currency appreciated further.
The central bank, which holds a policy meeting on Dec. 18, repeated in a presentation on Tuesday that a "measured cut" in its main policy rate, the one-week repo rate, and its overnight borrowing rate may be considered if needed.
It cut its overnight lending rate in November to 9 percent. Its overnight borrowing rate stands at 5 percent and its policy rate, the one-week repo rate, is at 5.75 percent.
"We expect falling inflation, upward pressure on the lira and the recent upgrade by Fitch to investment grade to point to further easing from the central bank," said Societe Generale emerging markets strategist Guillaume Salomon.
Istanbul's main share index was up 0.58 percent at 74,732.53 points near an all-time high, outperforming a 0.1 percent fall in the global emerging markets index.
By 1018 GMT, the lira eased slightly to 1.7862 to the dollar from 1.7855 late on Monday. Against its euro-dollar basket, it eased to 2.0592 from 2.0584.
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