Stronger dlr hits Turkish markets
* Dollar strengthening hits lira
* Central bank to release quarterly inflation report
ISTANBUL, Oct 27 (Reuters) - Bond prices slid while the lira softened on Tuesday on the effects of Monday's dollar strengthening on the Turkish market continued, dealers said.
The yield on the benchmark Aug 3, 2011, bond <0#TRTSYSUM=IS> rose to 8.71 percent from the previous day's close of 8.63 percent, while the lira IYIX= traded at 1.4860 against the dollar on the interbank market from the previous day's close of 1.4710 to the dollar.
"The strength of the dollar is one reason for the loss in lira and bond markets....," said Tuncay Tursucu, head of research at Meksa Invest.
Investors will be eyeing the central bank's quarterly inflation report for clues as to the size and timing of future rate cuts. The bank has cut rates by some 10 percentage points since last November to help support a contracting economy.
Possible future rate cuts have put downward pressure on yields and the lira. But a recent court decision to equalise withholding tax for foreign and domestic investors, which could hike the tax up 10 percentage points on forex futures and bonds, has hit the strength of Turkish paper and the currency.
The lira has gained around 5 percent this year, but upside is seen as limited due to concerns about the government's borrowing, set to reach 70.8 billion lira in the first four months of 2010.
Turkey's bank-heavy blue chip equities index was trading 0.99 percent lower at 50,722 at 0749, but is up some 92 percent since the start of the year, higher than any other emerging market apart from Russia.
Bucking the trend was automobile manufacturer Tofas (TOASO.IS) was trading 0.93 percent higher at 4.34 lira after it released third quarter net profit of 126 million lira, higher than expectations. (Reporting by Thomas Grove; editing by Chris Pizzey)
