ISTANBUL: Turkey's benchmark bond yield fell nearly 20 basis points and the lira firmed to its strongest against the dollar since early December after two successful debt auctions on Monday, while investors eyed a key central bank policy meeting due on Tuesday.
The Treasury sold 1.446 billion lira of a Jan. 27, 2016 fixed-coupon bond at a yield of 10.58 percent in a tap sale, above a forecast for 1.35 billion lira.
It also tapped a July 21, 2021 consumer price index-linked bond at a yield of 4.20 percent, selling 1.685 billion lira, easily beating a forecast of 1.1 billion lira.
The yield on the benchmark bond maturing on Dec. 4, 2013 closed at 10.33 percent, down from a previous close of 10.55 percent.
"Auctions were very successful as the Treasury's borrowing exceeded forecasts. The main reasons for this were central bank's liquidity easing ... and Turkish bonds' high yields attracting local and foreign investors," said a fixed income trader of a big local bank in Istanbul.
Since Jan. 10, the central bank has kept lira liquidity easy by providing cheap funding via one-week repo auctions at a fixed rate of 5.75 percent, making funds available for banks to buy bonds.
Last week, the Treasury borrowed 4.56 billion lira through taps of a 14-month zero-coupon bond and a 6-year floating-rate note. Including secondary sales, the total borrowing reached 4.9 billion lira ($2.68 billion).
The Treasury will hold two debt auctions on Tuesday where it is expected to borrow 2.7 billion lira from markets as it plans a total borrowing of 14.4 billion lira in January against a total redemption of 17.8 billion lira.
"I don't expect the yields to decline further tomorrow as they have already dipped today. We will monitor central bank's meeting," the trader added.
The central bank will announce the outcome of its monthly monetary policy meeting on Tuesday at 1200 GMT. The bank is expected to keep its policy rate, the one-week repo rate, unchanged at 5.75 percent.
By 1527 GMT, the lira traded at 1.82 versus the dollar, compared with 1.8285 late on Friday. During intraday trade, it firmed to its strongest level since early December of 1.8175 versus the dollar.
"We saw investors selling dollars (to raise lira) to participate in the debt auctions today which supported the lira," said Ozgur Altug, chief economist at BGC Partners.
Against a dollar-euro basket, the lira traded at 2.0958, slightly firmer than 2.0977 in late Friday trade.
"The global risk sentiment has improved very sharply too. We see extremely fast fund inflows to all emerging markets," Altug added. "I expect the lira to continue moving in tandem with global markets."
The euro hit three-week highs against a broadly weaker dollar and shares moved up on fresh signs that a deal may be reached on a Greek debt restructuring, as euro zone finance ministers prepared to decide on acceptable terms for approving further bailout funds.
The main Istanbul share index closed 0.54 percent up at 55,186.21 percent, slightly outperforming the MSCI emerging markets index, which was up 0.46 percent.
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