Turkish assets were mixed on Friday, with bonds gaining on fresh foreign demand amid a market squeeze while the lira eased a little as wary investors awaited the results of European banks' stress tests. Bonds have found traction in the last few sessions following talk earlier in the week of a possible third wave of quantitative easing in the United States, which could re-ignite carry trades for higher-yielding emerging assets.
However, Federal Reserve Chairman Ben Bernanke has since downplayed the prospect of renewed quantitative easing and concerns about the global growth outlook and the eurozone debt crisis could hamper renewed risk appetite. The yield on Turkey's benchmark February 20, 2013 bond fell to 8.87 percent from a previous close of 8.96 percent.
"We saw some flows from foreign buyers right across the curve, and since locals have already sold much of their bond holdings there was a slight squeeze in the market," said a bonds trader in Istanbul. Local banks, typically the largest holders of Turkish Treasuries, have reduced their bond holdings in order to free up funds for higher required reserve ratios on deposits imposed by the central bank earlier this year. The lira steadied to close at 1.6505 to the dollar from a previous close of 1.6465 on the interbank market. The main Istanbul share index dipped 0.17 percent to 62,635.13 points, in line with the emerging markets benchmark index which fell 0.11 percent.
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