Turkish bond yields rose on Tuesday and two treasury auctions drew weak demand as concern about a stubborn current account deficit and concerns about inflation deterred investors.
U.S. retail sales figures, which pointed to an improving economy and strengthened the case for a quicker reduction in the Federal Reserve’s stimulus programme, also dampened appetite for emerging market assets including Turkish debt.
The yield on Turkey’s 10-year bond closed at 9.32 percent, up from 9.04 percent at Monday’s close.
The Treasury sold a less-than-expected 744.5 million lira ($387 mln) of its March 8, 2023 fixed-coupon bond at a yield of 9.24 percent in a tap. The yield was above a forecast of 9.14 percent.
The results of debt auctions this week have been mixed.
On Monday, the Treasury sold more than expected of its Aug. 2, 2023 inflation-linked bond but less than expected of a June 20, 2018 fixed-coupon bond, suggesting the market is nervous about the outlook for inflation after it jumped to 9 percent in July.
“Net-net, quite disappointing auctions as investors still prefer to steer clear of Turkey risk given concerns on the current account deficit and its financing, exchange rate and the outlook for inflation,” Standard Bank economist Timothy Ash said in a note.
The lira weakened to 1.9332 against the dollar from 1.9231 late on Monday.
The main Istanbul share index was almost unchanged at 75,424 points, having risen above 76,000 points earlier in the session. It underperformed the broader emerging markets index, which was up 0.66 percent. ($1 = 1.9251 Turkish liras)