By Seltem Iyigun

ISTANBUL, Dec 7 (Reuters) - Turkish bond yields held steady and the lira traded in a narrow band on Friday with expectations of a central bank rate cut largely priced in and investors awaiting its confirmation.

The yield on the two-year benchmark bond was at 5.76 percent, virtually unchanged from Thursday's close at 5.77 percent. It hit a record low of 5.67 percent on Wednesday.

By 0957 GMT, the lira stood at 1.7912 to the dollar , compared with 1.7911 late on Thursday. Against its euro-dollar basket, it firmed to 2.0531 from 2.0570.

Turkey's central bank has been easing monetary policy since the middle of the year to counter slowing economic growth and is expected to move again at its next meeting on Dec. 18.

'The central bank policy stance limits further strengthening of the lira versus the dollar,' Fatih Keresteci, strategist at HSBC, said in a research note.

In November, it cut its overnight lending rate for a third consecutive month to 9 percent and said it may consider cutting the one-week repo rate - its main policy rate - and its overnight borrowing rate, at 5.75 percent and 5 percent respectively, in the period ahead.

Istanbul's main share index was flat at 75,785 points, in line with the global emerging markets index .

(Writing by Seltem Iyigun; Editing by Nick Tattersall/Ruth Pitchford) Keywords: MARKETS TURKEY/

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

COPYRIGHT

Copyright Thomson Reuters 2012. All rights reserved.

The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.