The benchmark 10-year bond yield rose above 18 percent while Turkey's banking index tumbled 7 percent.

Turkish banks started to withhold lira liquidity in the London swap market and will continue to do so Sunday's local elections at least, sources told Reuters, sending the lira overnight swap rate to 1,000 percent in London.

"Foreign investors who usually turn to lira through the swap market started to sell now because of lira demand. They are also exiting bonds as well," a stocks analyst at one brokerage said.

The yield on the 10-year benchmark bond rose to 18.23 percent from 17.35 percent on Tuesday. The two-year benchmark bond yield rose to 20.53 percent from 19.98 percent.