The Turkish lira was flat while bonds and equities faced selling pressure on Friday as investors cooled their hopes the government was close to signing a loan deal with the International Monetary Fund. The lira stood at 1.5520 against the dollar in early interbank trade, around levels at which it stood late on Thursday and compared with an interbank close of 1.5630.
Markets had jumped on Thursday on hopes a deal was close or had already been reached. But an IMF official told Reuters late in the day the Fund and Turkey had not agreed on a loan agreement, but that talks were continuing.
The yields of the benchmark February 2, 2011, bond stood at 12.27 percent, having traded as firm as 12.11 percent on Thursday. "Last night the benchmark bond traded as low as 12.11 percent because of the IMF news. There has been a bit of selling at the opening because the expected IMF news (of a deal) has not emerged," said a bond dealer at a foreign bank.
Istanbul's main share index was down 1.12 percent at 35,316.96 in early trade, having risen 3.24 percent a day earlier. It under-performed The MSCI index of emerging markets shares which was 0.4 percent higher. There have been expectations of a fresh deal between Turkey and the IMF since its last $10 billion lending pact expired in May last year. However, the two parties have remained at odds on issues such as government spending and tax administration while government foot-dragging fuelled speculation in recent months there might be no deal.
A loan from the IMF will help the Turkish government and companies roll over debt coming due later this year as global credit markets reduce lending amid the economic downturn. The blue chip index was led lower by the highly weighted banking sector. The banking index fell 1.35 percent, with Guarantee bank falling 1.5 percent.
Markets continued to shrug off a row over an alleged army plot to discredit the Islamist-rooted AK Party government, which prompted the ruling party to file a complaint with prosecutors this week. Analysts say conditions in Turkey no longer allow for a military coup to succeed.