Turkish bond yield at highest in one month, lira off lows

ISTANBUL - Reuters

Turkey’s lira decreases to fresh record lows amid the tensions between the Central Bank and the political figures as well as the ECB’s decision on Greek funds. REUTERS Photo

Turkey’s two-year benchmark bond yield rose to its highest since the start of January Feb. 5, hit by tensions between the Central Bank and President Recep Tayyip Erdoğan over interest rates and pressured also by the ECB’s decision to stop accepting Greek bonds in return for funding, while the lira climbed off record lows.

The bank decided on Feb. 3 not to hold an interim policy meeting to cut rates. Erdoğan, a staunch advocate of loose monetary policy, slammed the bank on Feb. 4, stoking worries over its independence and sending the lira to a record low against the dollar.

“It seems the president will continue to pressure the Central Bank about policy rates and the Bank’s independence will be more in question in the period ahead,” Deniz Invest said in a research note.

“Both the expectation of a lower policy rate and the tension between the president and the Central Bank create extreme volatility and ... pressure on the exchange rate,” the note added.

The lira traded at 2.4389 to the dollar in yesterday morning, off an early low of 2.4619, having hit a record low of 2.4680 overnight.

The two-year bond yield rose above 8 percent, pressured also by the European Central Bank’s decision to stop accepting Greek bonds in return for funding.

The main Istanbul share index rose 0.4 percent, with the banking index up 1.31 percent, after falling almost 3 percent on Feb. 4 after the Central Bank decided against an early rate-cutting meeting.