The Turkish lira and bonds weakened slightly on Monday as local banks sold debt to avoid higher funding costs, while tight liquidity meant primary dealers had to borrow using the central bank's repo facility, which comes with a higher interest rate. Istanbul's main stock index edged down 0.2 percent to 60.813 points, outperforming a 1.1 percent decline in the MSCI emerging markets index.
Expectations that monetary policy will remain tight were boosted earlier in the day by data showing Turkish industrial production rose 4.4 percent year-on-year in February, higher than a Reuters poll forecast of 3.5 percent growth. By 1503 GMT, the lira traded at 1.7985 to the dollar, a touch weaker than 1.7938 on Friday. Against its euro-dollar basket the lira eased to 2.0741 from 2.0705.
The lira usually strengthens on strong output data, but one forex trader noted that markets had less risk appetite on Monday after weaker than expected US non-farm payrolls data and high inflation figures in China. In addition, many markets were closed on Monday for the Easter holiday. Turkey's two-year benchmark bond yield closed at 9.35 percent, slightly higher than the previous close at 9.32 percent.