* Lira firms, 2-yr bond yields hit record low
* Shares just above flat
* Industrial output up 6.2 pct y/y, well above f'cast
By Seltem Iyigun
ISTANBUL, Nov 8 Turkey's lira inched higher and bond yields hit record lows on Thursday, still drawing support from the award of an investment grade credit rating this week as investors kept a wary eye on events on its border with Syria.
Better than expected industrial output on Thursday was fresh evidence of the solid economic performance which stood behind a Fitch Ratings upgrade that should begin to draw in a new class of investor into Turkey.
That drove the lira to its strongest since May, at 1.7693 to the dollar, but it turned back later on Wednesday on a poor global sentiment and reports Turkey was planning to ask NATO to site Patriot missiles on the border.
By 0913 GMT on Thursday, the lira had recovered again to firm to 1.7804 to the dollar from 1.7835 late on Wednesday. Against the euro-dollar basket, it strengthened to 2.0268, from 2.0296.
"Data such as PMI, net capital inflows and the recovery in the imports suggest that the economy has restarted to grow at a higher rate. The worst quarter for the economy is left behind," wrote Gizem Oztok Altinsac, economist at Garanti Securities.
"We expect growth at 4 percent in 2013. If capital inflows are higher then our forecast, growth can be higher."
Turkey's central bank, however, remains firmly in easing mood and the yield on Turkey's two-year benchmark bond fell to an all-time low of 6.78 percent, from Wednesday's close at 6.85 percent, helped by the rating move.
Istanbul's main share index was 0.23 percent up at 71,768 points, outperforming a 0.89 percent fall in the global emerging markets index.
Investors were awaiting announcements on third quarter results from lenders Akbank, Vakifbank and the carmaker Tofas, due later in the day.
Analysts at Ekspres Invest said that global concerns over growth would continue to weigh on the exchange, seeing support for the index at 71,000 and resistance around 72,500. (Writing by Seltem Iyigun; editing by Patrick Graham)
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