* AK Party wants more say over appointment of judges and
* Suggests political turmoil to continue before elections
* Finance minister comments may have steepened bond curve
* Lower-than-expected Nov industrial output growth hits
* Equities again underperform emerging market index
By Dasha Afanasieva
ISTANBUL, Jan 8 Turkey's lira slipped against
the U.S. dollar on Wednesday as the government bond yield curve,
which had briefly inverted on Tuesday because of speculation
about an emergency rate hike to rescue the currency, returned to
a positive slope.
The lira has hit record lows several times since Dec. 17,
when a wide-ranging graft probe began with a series of dawn
raids and arrests that have led to the resignation of three
ministers and the reported dismissal of hundreds of police
In the latest move by the ruling AK Party, it sent plans
seeking more say over the appointment of judges and prosecutors
to parliament late on Tuesday.
"This is the latest sign that things are not about to calm
down ahead of March local elections," a research note from
Ratings agency Fitch warned on Tuesday that "strains on
institutional integrity" caused by tensions between the
government and judiciary were among factors that might
eventually weaken Turkey's creditworthiness.
The lira slipped moderately to 2.1748 by 0917
GMT from 2.1605 late on Tuesday, though it was still firmer than
Monday's record low of 2.1950.
Meanwhile, the yield on Turkey's 10-year benchmark bond
rose to 10.15 percent from 10.12 percent late
on Tuesday, while the two-year yield fell back to 10.00 percent.
The curve is still much flatter than normal levels of around
50-100 basis points, but it has steepened from intra-day levels
on Tuesday, when it was minus 7 bps. In the past, the bond curve
in Turkey has sometimes inverted before monetary tightening
Public comments by Finance Minister Mehmet Simsek on Tuesday
may have partially reduced speculation about a monetary
tightening as soon as the Jan. 21 policy committee meeting.
Simsek indicated that he expected the low-rate monetary
policy to continue, saying Turkey was taking measures to keep
domestic demand at reasonable levels without resorting to
interest rate hikes - implying that he still had an
understanding with the central bank on low rates.
News of lower-than-expected growth in industrial production
reversed early gains by Turkish equities on Wednesday.
Industrial output rose a calendar- and seasonally-adjusted 2.9
percent month-on month in November, missing a Reuters forecast
of 4.2 percent but exceeding October's 0.7 percent increase.
The main Istanbul stock index was down 0.56 percent
at 68,214 points, underperforming the main emerging market index
, which rose 0.4 percent.
"We can...say that the November figure did not indicate a
genuine sequential growth of industrial output," Deniz Cicek,
economist at Turkey-based Finansbank, wrote in a note.
"As further social and political unrest seems possible ahead
of the two major elections this year, we see a noteworthy threat
on economic stability that poses downward risk on the growth
outlook in 2014."
(Editing by Andrew Torchia)