Turkish bonds fall on concerns

Bloomberg

The decline in lira-denominated bonds pushed the average yield 14 basis points higher to 12.72 percent at 2:01 p.m. in Istanbul, according to an index of securities tracked by ABN Amro Holding NV. Speculation is growing that Prime Minister Recep Tayyip Erdoğan may extend recent temporary tax cuts, further squeezing budget revenue after the budget deficit almost quadrupled in the first four months of 2009. Vatan newspaper said Tuesday he will announce measures Thursday to bolster the economy as it slides into its first recession since 2001.

Newspaper reports Wednesday said the government planned to further reduce corporate taxes in some areas of the country and boost jobs. "The speculation that the government may extend tax cuts may push bond yields higher, RBC Capital Markets’ analysts including Nick Chamie wrote in an report to investors. "This may add to concerns over the widening fiscal deficit and would dampen odds of a near-term IMF deal.