Turkish markets slip as strikes on Syria border continue

* Artillery shell, mortar bombs from Syria hit Turkey atweekend

* Turkish military retaliating in kind for each strike

* Lira weakens to more than 1.8 to the dollar, bond yieldsrise

By Seltem Iyigun

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

Sunday was the fifth consecutive day of Turkish retaliatorystrikes against incoming bombardment from northern Syria, wherePresident Bashar al-Assad's forces have been battling rebels whocontrol 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-dollarbasket , the lira eased to 2.0723 from 2.0700.

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

Fatih Keresteci, strategist at HSBC, said the situation onthe 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 fiveTurkish civilians were killed in artillery shelling from Syria.It was the weakest since mid-September. The yield on thetwo-year benchmark bond jumped to 7.75 percent onThursday.

Turkish Central Bank Governor Erdem Basci said on Mondaythat banks' annual loan growth at the end of 2012 was expectedto be 14 percent.

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

Turkey's main share index was down 0.19 percent at67,252 points, outperforming a 1 percent fall in the emergingmarkets index .

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

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

(Writing by Seltem Iyigun; Editing by Hugh Lawson)

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