Turkish assets gained ground on Friday, playing catch-up with other emerging markets after a 3-day holiday, although the lira and equities reversed some of their gains while bonds strengthened after weaker-than-expected US jobs data.
Following the holiday to mark the end of Ramazan, the lira traded at 1.7420 versus the dollar by 1255 GMT on the interbank market after weakening to 1.7500 following the release of data showing no growth in US non-farm payrolls, dashing expectations of a net 75,000 extra jobs created in August. The lira started the day around the 1.7330 level versus the dollar from a previous close of 1.7441.
The lira also slightly strengthened against a euro/dollar basket which is currently trading at 2.1160 compared with its level of 2.1175 on Monday. "Liquidity in the market is tight. It is normal that the lira reversed some of its gains following the data. If the euro stands around the $1.4520 level, I would expect the lira to stay below 1.7500 versus the dollar," said Serdar Pazi, fund manager at Ata Investment.
The benchmark May 15, 2013, yield fell to 7.79 percent from 8.82 percent before the data. The average benchmark compound yield closed previously at 7.97 percent. "On the bond market, we see effects from fears of a global recession which became more pronounced with the negative US data. In the current global outlook investors prefer safer assets such as bonds. The fact that some emerging central banks started to decrease their policy rates also pushed investors to buy bonds," said a fund manager at a portfolio company.
"We will see main market reactions next week with auctions and inflation data. Although August inflation is expected higher, the central bank already announced this would be temporary. So this would not be an issue for markets," she added. The Turkish Treasury will issue on September 5 a fixed coupon bond maturing on June 4, 2014. The Treasury will also tap on September 6 the current benchmark bond maturing on May 15, 2013, and issue a fixed coupon bond maturing in January 2020.
Turkish August CPI is seen at 0.40 percent month-over-month according to a Reuters poll of 15 economists. Data will be released on Monday at 0700 GMT. The main share index which was up nearly 3 percent before the data pared its gains to 1.62 percent to 54,819 points by 1337 GMT, outperforming the MSCI emerging markets index, which was down 1.4 percent. Shares closed 0.44 percent higher on Monday.
"We see the index increasing above the level supported by global developments during the holiday period. This also reflects the optimism resulting from the strengthening of the lira versus the (euro/dollar) basket which is a sign of the continuity of foreign inflows," said Hakan Tezcan deputy manager of research at Yatirim Investment.