By Seltem Iyigun
ISTANBUL, Feb 18 (Reuters) - The Turkish lira and bond yields traded flat on Monday as investors awaited the results of two debt auctions due later in the day and a central bank rate decision on Tuesday.
The main Istanbul share index was down in line with emerging markets peers.
By 0851 GMT, the lira was at 1.76785 to the dollar , virtually unchanged from 1.7674 late on Friday. Against its euro-dollar basket it firmed slightly to 2.0624, from 2.0646.
The yield on the two-year benchmark bond was at 5.79 percent, virtually unchanged from Friday's close at 5.78 percent.
Turkey's treasury will on Monday issue a five-year fixed-coupon bond maturing on Feb. 14, 2018 and tap a 10-year CPI-indexed bond maturing on Oct. 26, 2022.
'The central bank's monetary policy and the debt auctions will set the trend at the front-end of the yield curve,' said Arinc Yurtkuran, a fixed income trader at ING Bank.
The central bank is expected to raise reserve requirements on Tuesday in a bid to keep loan growth in check, but economists are divided over whether it will also cut interest rates.
Five economists in a Reuters poll expected it to trim both its overnight lending and borrowing rates by 25 basis points, while the remaining seven expected no change.
The bank has been trying to reinvigorate domestic demand without allowing loan growth to accelerate so quickly that it stokes inflation and widens the current account deficit, Turkey's main economic weakness.
'Given the lack of a convincing proof of recovery in economic activity, the central bank could have overlooked the acceleration in credit growth for some time,' Nilufer Sezgin, analyst at Erste Group, said in a research note, forecasting a 25 basis point cut in the lower end of the rate corridor.
Last month, the central bank cut its overnight borrowing rate to 4.75 percent from 5 percent and its lending rate to 8.75 percent from 9 percent. It also raised reserve requirements.
Istanbul's main share index was down 0.24 percent at 77,891 points, in line with a fall of 0.22 percent in the global emerging markets index.
(Writing by Seltem Iyigun; Editing by Nick Tattersall) Keywords: MARKETS TURKEY/
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