Weak bonds, lira, stocks

ISTANBUL (Reuters) – Turkish bonds, the lira and stocks all weakened yesterday as tensions over Iraq and the divided island of Cyprus precluded any rally on news the IMF may meet to approve a $3.1 billion loan tranche later in the day. Shares on the main Istanbul National-100 index fell 6.13 percent to close the morning at 11,003.40 points while the lira fell to bids of 1,483,000 lira to the dollar on the interbank market from Tuesday’s 1,475,000 close on the central bank-brokered spot market. The fact that the EU term president and the US secretary of state are coming in the same period points to talks on Cyprus and getting support for Iraq. Since both are negative, the market is tense, said Cem Kulahci of Meksa Securities. Current European Council president and Belgian Prime Minister Guy Verhofstadt visited Ankara yesterday for talks on the divided island of Cyprus and a dispute with Turkey over the creation of a European Union rapid reaction force. US Secretary of State Colin Powell will visit Ankara next week on a tour of European countries to boost efforts to rebuild Afghanistan. Turkish investors also suspect he will look for support for action against Iraq because of its refusal to allow UN weapons inspectors to operate in the country. Turkey’s defense minister hinted yesterday that the NATO member might drop its objections to a US attack on Iraq if circumstances changed. Prime Minister Bulent Ecevit said on Sunday that Ankara would not accept a solution on Cyprus to unite the Turkish-Cypriot north and Greek-Cypriot south that fell in line with the wishes of Greek Cypriots and the EU. Turkey has kept 30,000 troops on the island since 1974, when it invaded the north in response to a short-lived Greek-Cypriot coup aimed at uniting the island with Greece. Brokers said November inflation data and gross national product (GNP) figures, due in the next few days, are expected to indicate little respite for the crisis-hit economy. Bond yields on the busiest paper maturing on June 26, 2002 rose to 75.51 percent from Tuesday’s 74.91 percent in thin trade, with bankers saying some sales were coming before the release of inflation figures next Monday. Wholesale price inflation is running at over 80 percent, and underlying trends in October indicate the upward trend in prices will continue. Meanwhile, many analysts expect GNP figures worse than a government-targeted contraction of 8.5 percent in 2001. Turkey’s central bank earlier sold $20 million in a daily auction of dollars at an average 1,474,470 lira to the dollar. Earlier news that Turkey would put seized bank Bayindirbank up for sale under pledges to the IMF to rehabilitate its banking sector seemed to have little effect on the sentiment in the market.

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