ISTANBUL – Turkish bond yields fell yesterday as traders sold off dollars and moved some of their lira cash into high-yield domestic debt partly on optimism that a possible US attack on Iraq may be further off than feared. But the main share index fell after a 1.9-percent rise on Thursday and ended the day 0.14 percent lower at 9,307.04 points in thin trade. Turkish markets are plagued by worries over what kind of government will emerge from November 3 general elections and over the impact of possible conflict in neighboring Iraq on Turkey’s economy and a $16-billion IMF loan pact. Traders say the rise has been bolstered in recent days by Iraqi offers to allow the United States to inspect sites suspected of producing weapons of mass destruction. But the US House of Representatives late on Thursday gave President George W. Bush the authorization he sought to wage war, if necessary, to disarm Iraq, unnerving some traders. «Having seen the legislation accepting Bush’s campaign (against Iraq) pass shows something imminent may happen there,» said Mehmet Sami, a stocks trader at Ata Invest in Istanbul. NATO member Turkey could be a frontline ally in any attack against the Arab state, and markets fear upheaval in the region will undermine economic recovery. The lira currency strengthened to 1,636,000 to the dollar from Thursday’s 1,639,000. Some of the money moved into government debt, where real yields are high because of the political and diplomatic uncertainty and nerves over the IMF pact. Yields on the busiest July 2, 2003 debt fell around half a percentage point to 70.56 percent. Yields on the closely watched May 7, 2003 paper were also lower, at 70.48 percent. «Bond yields did not fall as far as forex did yesterday. Today the trend is still down but the fall in rates has not matched the selling of foreign exchange; things are a little more cautious as the weekend approaches. But I think the trend will be downward again next week,» said a treasury official at a bank who asked not to be named. Any falls in yields are good news for the treasury which faces some particularly hefty redemptions on its heavy debt load this month. Stocks, debt and the lira brushed off a court bid by 110 Turkish deputies to recall the 550-seat Parliament to debate a motion to delay the early general election. Some investors also worry a weak coalition government or a majority government led by Recep Tayyip Erdogan and his Justice and Development Party (AKP) may not convince markets a $16-billion IMF pact will be implemented fully. The country’s markets were jolted on Thursday by reports that Erdogan, Turkey’s most popular politician, favored restructuring the country’s debts but then recovered after his party said it would only consider a voluntary debt swap. The treasury said yesterday it planned to hold two auctions on October 15 for 371-day dollar- and euro-denominated debt.