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Turkish markets slip as strikes on Syria border continue

* Artillery shell, mortar bombs from Syria hit Turkey at weekend

* Turkish military retaliating in kind for each strike

* Lira weakens to more than 1.8 to the dollar, bond yields rise

By Seltem Iyigun

ISTANBUL, Oct 8 (Reuters) - Turkish assets slipped on Monday as sporadic bombardments from Syria and retaliatory fire from Turkish forces in the southeast of the country continued at the weekend.

Sunday was the fifth consecutive day of Turkish retaliatory strikes against incoming bombardment from northern Syria, where President Bashar al-Assad's forces have been battling rebels who control swathes of land near the Turkish border.

By 0730 GMT, the lira weakened to 1.8045 against the dollar

from 1.7946 late on Friday. Against its euro-dollar basket , the lira eased to 2.0723 from 2.0700.

The yield on the two-year benchmark bond rose to 7.64 percent, from a previous close at 7.57 percent.

Fatih Keresteci, strategist at HSBC, said the situation on the border was keeping the markets on edge.

"These developments caused a sell-off in financial markets, although in a smaller volume than last week," Keresteci added.

The lira hit 1.8110 against the dollar last week after five Turkish civilians were killed in artillery shelling from Syria. It was the weakest since mid-September. The yield on the two-year benchmark bond jumped to 7.75 percent on Thursday.

Turkish Central Bank Governor Erdem Basci said on Monday that banks' annual loan growth at the end of 2012 was expected to be 14 percent.

Turkish loan growth slowed from 34 percent in 2010 to 29.5 percent last year after a year of unorthodox monetary policy by the central bank aimed at preventing overheating.

Turkey's main share index was down 0.19 percent at 67,252 points, outperforming a 1 percent fall in the emerging markets index .

"Today the local agenda seems to be quiet yet the tension on Syria is still high due to the continuing firing by the Turkish artillery units," Ata Invest analysts wrote in a note.

"Globally, third-quarter results and Spain will be watched closely... Daily support and resistance levels are 66,700-67,300 and 67,800," the note added.

(Writing by Seltem Iyigun; Editing by Hugh Lawson)

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

Keywords: MARKETS TURKEY/