Turkish Lira, bonds hit by security concerns

ISTANBUL

REUTERS photo

The heightened tension between Ankara and Moscow over Syria pushed Turkish bond yields to four-and-half-month highs and hit the Turkish currency, despite a general positive outlook among emerging markets. 

Turkey’s lira dropped the most since the beginning of January and slid to a three-week low of 2.98 per dollar on Feb. 16, although it has rebounded later on Feb. 17 to 2.96. 

“The lira has come under a bit of pressure but it hasn’t done too badly,” said William Jackson, senior emerging markets economist at Capital Economics, as quoted by Reuters on Feb. 17. “There’s a concern that if tensions were to escalate significantly between Russia and Turkey we could see a sharper sell off,” he added. 

The yield on Turkey’s sovereign dollar bonds, however, rose 10 basis points (bps) to 351 bps on Feb. 17, the highest since September 2015, over fears the country is being dragged deeper into the war in neighboring Syria.

Turkey has been shelling People’s Protection Units (YPG) targets in the northern Syrian town of Azez since Feb. 13, after the group seized the Menagh air base north of Aleppo. Turkey regards the YPG as a terrorist organization, as it sees it as an extension of the outlawed Kurdistan Workers’ Party (PKK), with which Turkey has been in armed clashes since the mid-1980s.