In Brief
Turkish bonds rally after rate cut to record low Turkish bonds rallied the most in more than two-and-a-half years and stocks rose after the central bank cut its key interest rate to a record low to avert a recession. The gains on Turkey’s lira-denominated government bonds reduced the yields by as much as 89 basis points to 14.76 percent, the most since May 2006, according to an index of securities tracked by ABN Amro Holding NV. The yield was 15.06 percent as of 5.06 p.m. in Istanbul. The main ISE National 100 Index of stocks climbed 2.2 percent, the most in nine days, to 25,630.96. The Ankara-based central bank late on Thursday reduced the overnight borrowing rate by two percentage points to 13 percent, more than the largest decline forecast in a Bloomberg survey of 20 economists. Turkish bond yields have fallen 9.4 percentage points since October, when the government called in the International Monetary Fund after industrial output slumped 8.5 percent, consumer sentiment hit a six-year low and policymakers sold dollars to support the lira. «Bonds rallied after the rate cut as the market was expecting around a 100 basis-point cut,» said Barbaros Ozuyilmaz, who helps manage about 1.8 billion liras ($1.12 billion) of Turkish assets at Alternatifbank AS in Istanbul. The central bank will lower its key rate by 100 basis points next month, he predicted. (Bloomberg) Morgan Stanley lowers Eastern Europe forecasts Morgan Stanley lowered its forecasts for Eastern Europe’s main economies, citing a collapse in demand for cars and vehicle parts amid the global crisis. Hungary’s economy will contract 3.3 percent this year, more than the 2.4 percent drop earlier predicted, and the Czech economy will shrink 0.5 percent, rather than growing 2.3 percent, Pasquale Diana, an emerging markets economist in London at the bank, wrote in a note yesterday. Poland’s economic growth will slow to 1.1 percent, rather than 2.5 percent, while Romania’s expansion will be 1.7 percent, down from 2.9 percent, Diana wrote. «The external shock is larger than previously anticipated,» Diana wrote. «The collapse in activity in the region looks extraordinary. Central European industry is responding very aggressively to weaker demand by slashing output.» (Bloomberg) Nuclear power Bulgaria plans to restart a nuclear power reactor it shut in 2006 if the halt in Russian natural gas supplies drags on and if Brussels approves, Prime Minister Sergei Stanishev said yesterday. «Technical preparations (for the restart) have been begun by the government and the nuclear power plant,» Bulgarian national radio quoted Stanishev as saying. «A decision would be taken in a dialogue with our partners and based on the developments of the gas crisis,» he said. The European Union newcomer, one of the hardest-hit in the Moscow-Kiev gas price row, fears the cuts in Russian gas supplies threaten to cause power blackouts. (Reuters) Serbian energy Serbia announced yesterday a tender for the construction of two power plants, seeking partners for 2-billion-euro investment, the Energy Ministry said. (Reuters)
