Turk lira at new high

ISTANBUL (Reuters) – Turkey’s lira rose to its highest level in more than two years yesterday and stocks reached a record intra-day high on expectations of tame inflation and as global investors moved into high-yielding currencies. Lira bond prices also rose on the back of the inflation outlook and high expectations for three treasury auctions. The currency closed up 0.6 percent at 1.2932 to the dollar, back to levels not seen since March 2005, having earlier firmed as far as 1.2895. The lira is backed by some of the highest real interest rates in emerging markets and has risen about 10 percent since the end of 2006. The main Istanbul stock index rose as much as 2.3 percent to 48,826 points, a new intra-day record. It was trading at 48,421.81 points at midday. «The inflation data due today is expected to be good,» said Aslihan Balaban, head of research at Info Securities. «Today’s rise reflects rises in the US and other markets.» A Reuters poll forecast a monthly rise in consumer price inflation of 0.04 percent for June, compared with 0.5 percent in May. «Market players are expecting inflation to come in below economists’ expectations,» a bond dealer said. The yield on the February 4, 2009 benchmark bond fell to 17.99 percent before closing at 18.05 percent from Monday’s 18.18. The treasury held three auctions yesterday, including one for a May 6, 2009 bond, set to become the new benchmark, which yielded 17.80 percent at auction, lower than a market forecast of 17.85 percent. The treasury also sold 415 million lira of a March 7, 2012 fixed coupon bond, adding to pre-auction sales of 1.33 billion lira. That yielded 16.62 percent at the auction, compared with a Reuters poll of an average yield of 16.66 percent. A three-month reference bill yielded 17.12 percent, compared with a poll forecast of 17.10 percent. It sold 1.449 billion lira of that paper, as it had said it would. Investors are also taking comfort from recent polls which show the pro-business ruling Justice and Development Party will return to power in a single party government after a July 22 election.

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