Azernews.Az

By Bloomberg

The premium investors demand to own two-year Turkish notes over their 10-year equivalents narrowed from the widest in three years before the central bank meets to set rates amid accelerating inflation.

Turkish 10-year government bonds yields climbed four basis points to 8.90 percent narrowing the spread with two-year yields to 0.99 percentage points, after closing yesterday at the widest since January 2012. The lira was little changed at 2.6836 against the dollar at 12:24 p.m. in Istanbul after weakening to a record 2.731 on April 15.

Policy makers will keep all three of its main rates unchanged today, according to the median estimates in Bloomberg surveys. The central bank has opted for tightening liquidity through its money-market operations in an attempt to counter the tumbling currency, this year’s worst performer among 24 emerging markets tracked by Bloomberg.

The wide spread reflects “worsening risk perception for Turkey,” Bora Tamer Yilmaz, an economist at Ziraat Yatirim, a brokerage in Istanbul, said by e-mail on Wednesday. “This means the central bank will maintain a tight monetary stance in the upcoming period resulting in a higher yield curve.”

The lira, beset by government interference in monetary policy and concern that an expected increase in U.S. interest rates will suck money out of Turkish capital markets, is 13 percent weaker this year and slid 3.4 percent in April.

Policy makers will keep the main one-week repurchase rate at 7.50 percent, according the median estimate in a Bloomberg survey of 23 economists. They will also maintain the overnight lending and borrowing rates at 10.75 percent and 7.25 percent, respectively.

Consumer-price growth accelerated for the past two months, to 7.6 percent in March, down from as high as 9.7 percent last May. Still, that’s more than two percentage points above the central bank’s target.