(Bloomberg) -- The lira appreciated, government bonds gained and the costs to insure Turkish debt against default fell after President Recep Tayyip Erdogan signaled support for status-quo economic policy. 

The Turkish currency advanced as much as 0.6% on Tuesday before trading 0.2% higher at 32.2024 per US dollar as of 12:59 p.m. in Istanbul, adding to Monday’s gains. The yield on two, five and 10-year government bonds all fell, while five-year credit default swaps linked to sovereign debt narrowed.

Erdogan said current economic policies will yield positive results in his first speech after his party ceded control of major cities including Istanbul and Ankara at local elections. That sparked a relief rally as investors returned to markets they’d fled in the runup to elections. Foreigners have sold more than $450 million in Turkish bonds and stocks in the first three weeks of March, according to data from the central bank. 

Read more on: How Turkey’s Local Elections Became a Vote on Erdogan: QuickTake

Deutsche Bank strategists now see a more favorable outlook for the current account and said election results are “unlikely” to prompt a reversal in contractionary economic policies. 

Onur Ilgen, head of Treasury at MUFG Bank Turkey AS, also views the initial signals from the management as positive for markets, and expects foreign capital inflows to pick up and potential for gains from a carry trade where investors borrow in lower-yielding currencies to buy lira.

“Unless there’s an unexpected political shock, investors will view it as the beginning of a lira-positive period,” Ilgen said. “Local election risk is now over for the time being.”

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