Turkish yields fell to the lowest in almost seven weeks on expectations the central bank will keep its cheapest-ever borrowing costs unchanged tomorrow while speculation of a U.S. debt deal buoyed riskier assets. The yield on two-year notes declined eight basis points, or 0.08 percentage point, to 8.74 percent, the lowest intraday level since June 3, as of 1:48 p.m. in Istanbul, an RBS Istanbul Benchmark Bond Index showed. Inflation slowed to 6.2 percent in June from 7.2 percent in May, spurring speculation the bank will leave the main interest rate at 6.25 percent. The central bank has added 10 percentage points to the amount banks have to hold in reserves since December to limit consumer loans and curb the current-account deficit. Emerging-market stocks and bond rebounded after President Barack Obama endorsed a $3.7 trillion debt-cutting plan that would combine tax increases and spending cuts. In Turkey, “the slowdown in credit growth is playing into the hands of the central bank and the expectation is that there will be no change in the central bank’s dovish stance,” Onur Aydogan, head of fixed-income trading at ING Bank AS in Istanbul, said by telephone. “We are seeing the effect of a general risk-positive attitude environment after Obama announced he backed the plan.” Credit growth may show more convincing signs of deceleration after rates rose on consumer loans, helping to restore confidence in central bank policies, BNP Paribas SA said July 13. The lira strengthened 0.1 percent to 1.6560 per dollar, a second day of gains. The ISE National 100 Index (XU100) slipped 0.03 percent to 61,820.23. To contact the reporter on this story: Selcuk Gokoluk in Istanbul at sgokoluk@bloomberg.net To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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