Turkish bond yields decline

Bloomberg

Yields on the lira bonds lost 24 basis points to 11.41 percent in Istanbul, the lowest intraday level since ABN Amro NV’s index of securities started in 2004, as of 1:24 p.m. in Istanbul. he lira rose 0.9 percent to 1.5488 per dollar, snapping a three-day decline. Bond yields have more than halved from 25 percent in October as policy makers slashed their main borrowing rate to 8.75 percent from 16.75 percent to cushion the economy amid the worst contraction ever in the first quarter. A report Wednesday showed Turkish industrial output slumped more than forecast in May, while in the U.S. the unemployment rate climbed to the highest since 1983, the government said last week.

Further rate cut

"The Central Bank will probably cut rates 50 basis points this month," said Barbaros Özüyılmaz, who helps manage the equivalent of $1.1 billion of Turkish assets at Alternatifbank in Istanbul.

"When you look at the economic situation in the U.S., Turkish first-quarter growth figures and data for industrial output it makes people think there may be more room for cuts beyond this month." The Central Bank, which is scheduled to decide on rates July 16, said at its last meeting that it may lower rates again unless there are "clearer signs of economic recovery."

Industrial production slumped 17.4 percent in May from a year earlier, the statistics agency in Ankara said Wednesday. The economy shrank an annual 13.8 percent in the first quarter, the agency said on June 30. The pace of inflation may slow to "historic lows" after accelerating to an annual 5.7 percent in June, the Central Bank said July 6.