By Seltem Iyigun

ISTANBUL, Dec 10 (Reuters) - Turkish bond yields fell and shares hit a record high on Monday after data showing the recovery in the economy was weaker than expected, reinforcing prospects of the central bank cutting interest rates in December.

Gross domestic product growth slowed to 1.6 percent year-on-year in the third quarter from 3 percent in the second quarter, and industrial production slumped 5.7 percent year-on-year in October, data showed.

Analysts polled by Reuters had estimated growth of 2.6 percent in the quarter while industrial output has been seen falling 2.5 percent.

The yield on the two-year benchmark bond closed at 5.75 percent from Friday's close of 5.76 percent.

'Bond yields inched down and the lira slightly eased as the weaker-than-expected data boosted investors' hopes for more rate cuts from the central bank,' said Pinar Uslu, strategist at ING's Affluent Banking unit.

'We will monitor the central bank governor's speech tomorrow to see if he gives new hints about monetary policy.'

By 1551 GMT, the lira was flat against the dollar at 1.7892. Against its euro-dollar basket , it slightly firmed to 2.0511 from 2.0530.

Central Bank Governor Erdem Basci will speak at a conference at 0800 GMT on Tuesday.

The main share index rose 0.65 percent to 76,734, after hitting its all-time-highest level of 76,954.33 earlier in the day on the expectation of a rate reduction. The global emerging markets index was trading up 0.39 percent.

Aiming to counter an economic slowdown, Turkey's central bank has been easing monetary conditions since the middle of the year.

At its meeting in November, it cut its overnight lending rate to 9 percent for the third time and said it may consider reducing its policy rate and overnight borrowing rate if necessary to ensure financial stability.

The bank's overnight borrowing rate currently stands at 5 percent and the policy one-week repo rate is at 5.75 percent.

(Writing by Seltem Iyigun; Editing by Toby Chopra) Keywords: MARKETS TURKEY/CLOSE

(seltem.iyigun@thomsonreuters.com)(+90 212 350 70 62)(Reuters Messaging: seltem.iyigun.thomsonreuters.com@reuters.net)

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