April 27, 2020 / 2:36 PM / a month ago

UPDATE 1-Turkish cenbank makes big one-day bond buy, yields tumble

(Adds details on QE)

ISTANBUL, April 27 (Reuters) - Turkey’s central bank bought 5 billion lira ($715 million) in debt from the Unemployment Insurance Fund on Monday, continuing its economic stimulus and pushing bond yields lower in the face of the coronavirus pandemic, according to two bankers.

Since the outbreak hit Turkey, the central bank has ramped up purchases from primary dealers in order to backstop the fund that will cover some lost wages, and also to provide market liquidity and keep credit flowing.

The bank - which has also continued to slash interest rates - has bought a total of 33.5 billion lira of government bonds in secondary markets since the end of March, including 21.6 billion lira from the unemployment fund.

With the pandemic forcing businesses to furlough or lay off millions of staff, Ankara has tapped the unemployment fund to top up income or pay daily stipends, while small businesses are being given access to fresh loans.

Yields on government bonds have fallen due to both the central bank purchases and to a decision by a regulator to impose a new asset-ratio rule on lenders, which analysts said would prompt private banks to ramp up buying.

Turkey’s two-year benchmark yield fell 351 basis points last week after the move by the BDDK watchdog. The yield on the 10-year benchmark bond was 11.84% on Friday, down from 14.13% a week earlier.

In all, the government has spent 200 billion lira to support the economy, Finance Minister Berat Albayrak said on Saturday, including 107.4 billion lira provided to some 120,000 companies and 16.8 billion lira to support traders.

The central bank has cut its policy rate by 200 basis points since mid-March, in addition to 1,325 basis points of monetary easing since July.

$1 = 6.9835 liras Reporting by Nevzat Devranoglu; Writing by Ali Kucukgocmen; Editing by Dominic Evans and Jonathan Spicer

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