ISTANBUL: Turkish bonds firmed on Tuesday although gains were limited in cautious trade ahead of Thursday's central bank meeting, at which some economists say the bank could trim its lending rate.
The lira turned negative against the dollar after Federal Reserve Chairman Ben Bernanke, in testimony to Congress, offered few new clues to whether the US central bank was moving closer to a fresh round of monetary stimulus, repeating the Fed's pledge to act if needed.
The lira weakened to 1.8126 against the dollar by 1432 GMT from 1.8070 earlier and from 1.8140 on Monday. Against its euro-dollar basket the lira was steady at 2.0127.
Some believe monetary policy easing is imminent in Turkey, following comments earlier this month from central bank Governor Erdem Basci that the bank may cut its year-end 6.5 percent inflation forecast in July.
"Markets are awaiting the monetary policy meeting now. Today's Bernanke speech is important, we will see a move in a narrow band and low volume," said one bond trader.
The yield on Turkey's benchmark bond due March 5, 2014 dipped to 7.89 percent from 7.96 percent on Monday.
Turkey's central bank injected 2.5 billion lira ($1.38 billion) into the market in a one-week repo auction on Tuesday, after making a 3 billion lira injection on Monday.
Some economists say the bank may consider narrowing the interest rate corridor -- the difference between its overnight borrowing rate, now at 5 percent, and its lending rate, which is at 11.5 percent -- at its Thursday meeting.
"As the central bank moved closer to its price and financial stability objectives, it has found itself in a much more comfortable position to ease monetary conditions, and it has begun to utilise the window for easing as evidenced by the drop in the effective funding rate," said Finansbank economist Inan Demir.
The bank is not expected to cut its main policy rate, the one-week repo rate, from its current record low of 5.75 percent.
Istanbul's main share index closed down 0.38 percent at 62,440.25 points, underperforming a 0.62 percent rise in the MSCI emerging markets index.
Comments
Comments are closed for this article.