Turkish bonds fall, shares up

Turkish bonds fell again on Friday, with the benchmark yield rising 52 points to a 17-month high, as investors sold after open market operations left liquidity tighter and following Thursday's hike in the central bank's overnight lending rate.
The yield on Turkey's benchmark bond maturing on July 17, 2013 closed at 9.43 percent on Friday compared with a previous close of 9.14 percent. During intraday trade, the benchmark yields touched 9.66 percent as lira liquidity remained tight pushing yields higher, analysts said.
The yield on the 2013 bond had jumped 44 basis points on Thursday after the central bank held its policy rate but hiked the overnight lending rate, widening the interest rate corridor, and highlighted risks to the economy from significantly higher inflation. Its moves were seen supporting the lira but hitting bonds.
The repo rate rose to 10.73 percent on Friday, after the central bank increased the interest rate on borrowing facilities provided to primary dealers by repo transactions from 8 percent to 12 percent at its monthly meeting. The Turkish central bank provided 11 billion lira ($5.9 billion) via its one-week repo auction, while draining 15 billion lira ($8.1 billion) from markets on Friday. Turkish primary dealers used the central bank repo facility on Friday for a current amount of 8.685 billion lira ($4.7 billion).
The lira closed on the interbank market at 1.8460 versus the dollar from a previous close of 1.8615. The currency traded firmer at 1.8341 in after-hours trade. The currency was at 2.1888 versus a euro/dollar basket, strengthening from Thursday's close of 2.1994. The lira hit its weakest level of 2.2274 against the basket on October 18.
The Turkish central bank sold $350 million on Friday in its forex auction. The total sum sold by the bank since it started its daily forex auctions on August 5 is now $7.55 billion. The main Istanbul share index closed up 1.59 percent at 56,792.34 points, outperforming the MSCI emerging markets index which was up 1.46 percent.