Turkish bonds flat, shares up after Cyprus deal

Turkey's shares rise Monday following a bailout deal in Cyprus. (Reuters)

Turkish shares rose on Monday following a bailout deal in Cyprus, with bonds flat on expectations the rescue would not persuade the central bank to cut interest rates at its policy meeting.

The bank's monetary policy committee, which meets on Tuesday, is expected to keep interest rates unchanged after recent weakness in the lira currency. But it may increase banks' reserve requirements to keep loan growth in check, economists believe.

That basic picture had not changed following the EU's rescue of the island economy.

"Following the risk aversion triggered by the Cyprus developments, we think the monetary policy committee will refrain from undermining the currency further, at least until there is more clarity regarding the Cypriot situation even if there is a bailout agreement in place now," said Deniz Cicek, a trader at Finansbank.

"We are not expecting any changes to the interest rate corridor this month."

By 0830 GMT the yield on the two-year bond stood at 6.22 percent, unchanged from Friday's close.

Istanbul's main share index rose 0.72 percent to 83, 049.46 points, lagging the global emerging markets index, which rose up 1 percent.

The lira firmed slightly to 1.8129 to the dollar, from 1.8140 late on Friday. Against its euro-dollar basket it firmed to 2.0842 from 2.0851.

Last Update: Monday, 25 March 2013 KSA 13:00 - GMT 10:00