ISTANBUL: Turkish bond yields inched down and the lira was steady on Monday as investors kept to the sidelines on the eve of a central bank policy meeting.
Shares were led lower by a fall of more than one percent in the banking sector.
By 1044 GMT, the lira was at 1.8018 to the dollar , virtually unchanged from 1.8022 late on Friday. Against its euro-dollar basket, the currency eased to around 2.0517 from 2.0464.
The yield on Turkey's two-year benchmark bond inched down to 6.41 percent from Friday's close at 6.43 percent.
The bank holds its regular policy meeting on Tuesday.
"Markets will be waiting for the monetary policy meeting tomorrow, so there will unlikely be a major move before that," wrote Erkin Isik, strategist at TEB.
Investors expect the bank to cut the upper end of the interest rate corridor, the overnight lending rate, to 9 percent from 9.5 percent, according to a Reuters poll on Friday.
"Despite the total cut of 200 basis points in the recent period, loans didn't pick up significantly. Hence the bank would continue to cut the upper end of the rate corridor," wrote Fatih Keresteci, strategist at HSBC.
"There are also a small number of analysts who expect a cut in the lower end of the corridor. Such a decision would affect the lira as well as the bonds," he added.
Central Bank Governor Erdem Basci said last week the bank could cut its overnight borrowing rate, the lower end of the rate corridor, or the policy rate if the lira keeps climbing.
The bank started cutting its overnight lending rate in September to counter the slowdown in the economy, but has kept its overnight borrowing rate at 5 percent and its main policy rate, the one-week repo rate, at a record low of 5.75 percent since August 2011.
Investors were also monitoring a Nov. 21 conference on Turkey organised by credit ratings agency Moody's, after rival Fitch lifted Turkey's rating to investment-grade on Nov. 5.
Istanbul's main share index was 0.69 percent down at 70,304 points, led by a fall of 1.82 percent in the banking shares.
Turkey has raised 4.51 billion lira ($2.5 billion) from the sale of a 20.8 percent stake in state-controlled Halkbank , selling 299 million shares for 15.1 lira apiece - close to the top of the offer range of 13.80-15.90 lira.
"The banking shares fell due to Halkbank's sale," said Ozgur Yurtdasseven, a research at manager in Garanti Securities.
"Today is the final day for some corporate investors bidding in the sale to deliver the funds. So, they sell other banks."
Yurtdasseven said Halkbank shares, trading in which is suspended from Nov. 12 until Nov. 21, could fall once the share offering is completed.
"The last trade in Halkbank shares (on Nov. 9) was at 15.9 lira, but the sale occurred at 15.1.
It suggests that when trading starts, Halkbank shares will fall and this affects the other banking shares negatively," he said.
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