Turkish bond yields dipped on Friday due to speculation the central bank will not raise reserve requirement ratios at this month's policy meeting and helped by easer oil prices. Stocks ended one percent higher, with shares in Turkey's largest conglomerate Koc Holding rising 2.6 percent after it posted a 2010 net profit up 21 percent at 1.73 billion lira ($1.1 billion) last year.
The yield on the November 7, 2012 benchmark bond fell to 8.84 percent from 8.94 on Thursday. The yield stood at 9.12 percent at the start of the week, a 10-month high. The lira weakened to 1.5860 against the dollar on the interbank market from 1.5790 on Thursday. The currency has lost 2.5 percent of its value to the greenback since the start of the year.
Tevfik Bilgin, head of the Turkish banking regulator (BDDK), said on Thursday that credit growth was in a slowing trend and that he expected 20-25 percent loan growth by the year-end. "The BDDK chairman's and the central bank governor's remarks yesterday pointed to no change in reserve requirements at the March monetary policy committee meeting. The rise in oil prices has slowed down, easing the upward pressure on the benchmark bond," said a bond trader.
He saw a positive sentiment prevailing until the monetary policy committee meets on March 23, and expected bond yields to fall as foreign buying came in. The bank has been tightening monetary policy overall by raising reserve requirements to offset cuts in headline interest rates - reining in liquidity, which in turn pushes up the cost of money across the yield curve.
Brent crude fell more than $2 a barrel on Friday, easing back from highs which have put broad pressure on markets in Turkey, which imports more than 95 percent of the oil and natural gas it uses. Turkey's current account deficit rose 91.4 percent on the year to $5.86 billion in January, central bank data showed on Friday, slightly below a Reuters poll forecast for a deficit of $6.1 billion. Turkish stocks eased 0.26 percent to 63,004 points, while the emerging market benchmark was down 1.11 percent.
Supporting the index was an upgrade to Turkish equities to "overweight" by HSBC, which also downgraded Russia to "neutral". HSBC said the consensus was overly bearish on Turkey and the scope for lower oil prices and central bank interest rate hikes were supportive.