April 27, 2017 / 8:36 AM / 9 months ago

Turkish CDS, yield premia fall as rate rise reassures investors

LONDON, April 27 (Reuters) - Turkish credit default swaps fell to the lowest levels in almost two years on Thursday after the central bank’s decision to tighten monetary policy raised hopes it might be able to tackle inflation without government interference.

The bank surprised on Wednesday by hiking one of its multiple interest rates to rein in double-digit inflation fuelled by weakness in the lira and concerns about policy independence.

Data from IHS Markit showed five-year CDS at 214 basis points, the lowest since July 2015 while the average yield spread paid by Turkish dollar bonds over U.S. Treasuries slipped to 291 bps, the lowest since mid-2016 on the EMBI Global index .

The central bank move has lifted the lira to its strongest level in about four-month against the dollar and sharply pushed down 10-year local yields to five-month lows . (Reporting by Sujata Rao; editing by Karin Strohecker)

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