Turkey’s lira held near a two-month low, its sovereign dollar bonds tumbled and the cost of insuring exposure to the country’s debt spiked as the presidential election appeared headed for a runoff with incumbent president Tayyip Erdogan in the lead. Turkish stocks also fell, with the main banking index slumping by more than 9 per cent.

The lira was at 19.66 to the dollar at 1034 GMT, after reaching 19.70 in earlier trading, its weakest since a record low of 19.80 hit in March this year following deadly earthquakes.

It was on track for its worst trading session since early November. The Istanbul bourse was trading more than 2 per cent lower, after an earlier 6.38% drop triggered a market-wide circuit breaker.

Erdogan led his opposition rival Kemal Kilicdaroglu with 49.4 per cent of votes to Kilicdaroglu’s 44.96 per cent, with 99 per cent of ballot boxes in Sunday’s first round election counted, according to the High Election Board chairman. It put the two on track for a May 28 runoff with Erdogan as the frontrunner.

“This is a major disappointment to investors hoping for a win for opposition candidate Kilicdaroglu and the reversion to orthodox economic policy he promised,” said Hasnain Malik, head of equity research at Tellimer. In the parliamentary vote, the People’s Alliance including Erdogan’s AKP appeared headed for a majority. Dollar-denominated sovereign bonds issued by Turkey fell by more than 7 cents before recovering slightly, while the five-year Turkey credit default swap spread jumped 114 basis points (bps) to 606 bps, according to S&P Global Market Intelligence, the highest since November 2022. By 1034 GMT, it stood at 604 bps.