ISTANBUL, Oct 8 (Reuters) - Turkish bond yields fell and the lira firmed on Tuesday thanks to strong demand at a series of government debt auctions, while stocks fell, as markets await a resolution to the U.S. fiscal deadlock.
The lira firmed to 1.9832 against the U.S. currency by 1510 GMT, from 1.9905 late on Monday.
The 10-year benchmark yield closed down at 8.8 percent from 8.94 percent on Monday, while the two-year yield ended the session below 8 percent from 8.28 percent.
The Treasury sold a new two-year benchmark bond and a ten-year bond at rates below those forecasted by a Reuters poll.
The improved sentiment in Turkish bond markets was not enough to lift stocks, however.
Istanbul's main share index closed down 1.1 percent at 75,063.87 points, underperforming emerging market peers which were up 0.43 percent.
The Turkish government outlined its medium-term forecast at the end of the day on Tuesday. As expected its growth forecast for 2013 was cut, to 3.6 percent from 4.0.
The standoff in the United States Congress that has shut down parts of the federal government continued, and could potentially push the world's biggest economy to the edge of defaulting on its sovereign debt.
While some said the impasse has caused investors to move out of riskier assets, others said it boosted Turkish and other emerging markets because it made an imminent reduction in the Federal Reserve's bond-buying programme less likely.
(Reporting by Dasha Afanasieva; Editing by Hugh Lawson) Keywords: MARKETS TURKEY/
(Dasha.Afanasieva@thomsonreuters.com)(+90 212 350 7051)(Reuters Messaging: Dasha.Afanasieva.email@example.com)
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