Turkish assets weaker as tighter liquidity exposes risks
ISTANBUL Aug 14 (Reuters) - Turkish bond yields rose on Wednesday and the lira eased, with concern about the country's gaping current account deficit deterring investors as global liquidity conditions tighten.
The yield on Turkey's 10-year bond rose to 9.43 percent by 0920 GMT, up from 9.32 percent at Tuesday's close. The lira weakened to 1.9402 against the dollar from 1.9332 late on Tuesday.
Investors are preparing for the U.S. Federal Reserve to start tapering its $85 billion a month of bond buying, dampening appetite for emerging market assets, including Turkish debt.
Turkey's current account deficit - its main economic weakness at around 7.1 percent of GDP - makes it more vulnerable than many peers to capital outflows when central banks in developed economies start to tighten liquidity, economists say.
The outlook for inflation, which jumped to 9 percent in July, is also a concern, as reflected by the mixed results of Treasury debt auctions this week, in which demand for inflation-linkers was higher than for fixed-coupon bonds.
"While the Treasury has completed most of its borrowing target for the month, in the four auctions on Monday and Tuesday, the yields in the auction were above market expectations," said Erkin Isik, a strategist at TEB-BNP Paribas.
"Tightening global liquidity conditions ... was the main reason behind this move."
The main Istanbul share index was almost unchanged at 75,620.89 points, in line with the broader emerging markets index, which was down 0.04 percent. (Reporting by Seda Sezer; Editing by Nick Tattersall, Ron Askew)