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Turkish bonds, stocks firm ahead of inflation data

Reuters - Saturday, July 4

ISTANBUL, July 3 - Turkish stocks sustained 2009 high levels ahead of June inflation data on Friday while bond yields firmed towards a 2009 low to resist selling pressure in the global markets ensuing from a big drop in U.S. payroll data.

The Turkish Statistics Institute will release inflation data at 1400 GMT on Friday when the stock exchange closes. A Reuters poll showed the consumer price index was seen unchanged month-on-month in June, after annual inflation fell to its lowest in 40 years in May.

The yield on the benchmark Feb. 2, 2011, bond <0#TRTSYSUM=IS> fell to 11.62 percent since it hit its lowest at 11.54 percent on May 7. It closed at 11.79 percent on Thursday.

The lira <IYIX=> softened to 1.5335 at 0730 GMT from the previous day's 1.5265 against the dollar on the interbank market.

Traders are betting on continued easing by the Turkish central bank. The bank's rate-setting Monetary Policy Committee is scheduled to meet on July 16.

Comments by the Turkish Central Bank Deputy Governor Erdem Basci that there was room for further rate cuts, along with a 1.67 percent month-on-month fall in retail prices in Istanbul in June, bolstered rate cut hopes.

"This certainly seemed to be the message from our own meetings at the Central Bank last month -- we got the "lower for longer" drift, and certainly this is the message that comes out of the Central Bank's various latest communiques," Timothy Ash of Royal Bank of Scotland said.

"We see Central Bank overnight rates heading to 8 percent and below this year; next meeting 25 basis points rate cut," he said.

The stock exchange was expected to be quiet on Friday.

"There will not be much volatility in the stock exchange because of the U.S. holiday. The index will move on a 500 points range between 36,800-37,300," said Cem Tozge in Ata Investment Securities.

The main Istanbul share index <.XU100> was trading 0.01 percent lower at 37,034, holding to its year-high level that it saw last week on expectations of a loan deal with the International Monetary Fund.

The stock index having gained around 60 percent since its 2009 low in March and 40 percent this year. The share index outperformed the MSCI index of emerging market stocks <.MSCIEF>, which shed 0.02 percent on Friday.

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