* Lira up on tightening prospects, technical downside in
* Bonds yields down after successful debt auctions
* Shares up on global risk-on mode, Garanti Q1 net profit
ISTANBUL, April 25 The Turkish lira strengthened
and bond yields fell on Wednesday, a day after the treasury held
three successful debt auctions and as investors awaited the
central bank's quarterly inflation report on Thursday for signs
of a more hawkish policy.
Shares traded stronger than the emerging markets index as
higher than expected corporate results abroad underpinned
investors' appetite for riskier assets.
By 0756 GMT, the lira had firmed to 1.7760
versus the dollar, compared with 1.7821 late on Tuesday. Against
a euro-dollar basket, the lira traded at 2.0610,
stronger than 2.0677.
"The prospects that the central bank will announce on
Thursday further monetary tightening and new adjustments in the
liquidity management are supporting the lira," said a forex
The Turkish Central Bank will announce its quarterly
inflation report at 0700 GMT on Thursday.
Central Bank Governor Erdem Basci said on April 21 the bank
would prefer to change its policy stance rather than revise its
inflation forecast of 5 percent, underlining the hawkish tone
the bank has adopted since its March meeting.
The bank operates a complex policy mix of daily liquidity
injections, a low policy rate and an interest rate corridor - an
adjustable gap between its overnight borrowing and lending
rates. It also provides smaller amounts of lira at more costly
rates when the lira comes under pressure.
"The focal point of CEEMEA markets for the rest of the week
will be Turkish Central Bank's inflation report, which is likely
to show CPI growth should start declining as early as May but to
reach the 5 percent target only in mid-2013," wrote analysts at
"(The central bank) has been providing just enough lira
liquidity at the repo auctions to bring down the average funding
cost close to 8 percent. However, this generous liquidity is
likely to persist only as long as the lira appreciates so that
their inflation fighting efforts are not undermined," analysts
Turkish consumer prices rose 10.43 percent in March, more
than double the central bank's year-end target of 5 percent.
Investors were also awaiting a speech from Basci at 1030 GMT
"The dollar-lira rate indicates a technical downside trend.
We think the first important level will be 1.7750. If the lira
firms below this level, it can technically strengthen further
towards 1.75," said Fatih Keresteci, a strategist at HSBC.
"Turkish markets will trade in a cautious optimistic trend
due to the positive risk sentiment in global markets after
Apple's results," Keresteci said. Apple Inc's quarterly
results beat Wall Street estimates on stronger-than-expected
demand for the iPhone.
Turkey's two-year benchmark bond yield
stood at 9.40 percent, down from a previous close at 9.45
percent. The yields declined slightly the previous day after
successful debt auctions.
The Turkish Treasury raised 2.5 billion lira on Tuesday by
selling three bonds maturing in 11 months, two and 10 years'
time, and at lower yields than forecast.
"The effect of yesterday's successful debt auctions would
continue on the secondary market," Keresteci also said.
Istanbul's main stock index was 0.79 percent up at
60,175 points, outperforming a 0.16 percent rise in the MSCI
emerging markets index.
Shares in Turkish lender Garanti, part-owned by
Spain's BBVA, was 0.6 percent up at 6.74 lira after it
reported that first quarter net profit rose 0.8 percent to 861.7
million lira ($483.80 million), beating a Reuters poll for a net
profit of 824 million lira.
(Writing by Seltem Iyigun; Editing by Hugh Lawson)