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Turkish bonds, lira little changed after energy price hikes

* Istanbul inflation data due

* Shares edge 0.3 percent lower

By Seltem Iyigun

ISTANBUL, Oct 1 (Reuters) - Turkish bond prices and the lira were close to flat on Monday, showing little reaction to hikes in natural gas and electricity prices that, while steep, were less harsh than expected.

Shares dipped 0.3 percent, slightly underperforming the emerging markets index.

State energy company Botas said on Sunday that natural gas prices for consumers would rise by 9.8 percent in response to increasing global energy costs.

Officials of energy market watchdog EPDK said on Monday - ahead of the release of inflation data for Istanbul - that electricity prices would rise for industry by 4.03 percent and for households by 9.81 percent.

The yield on Turkey's two-year benchmark bond

edged up to 7.60 percent in early over-the-counter trade, from 7.56 percent late on Friday.

"The (energy) price hikes pushed short-term bond yields up. However, the timing looks good as the government is expected to announce its medium-term plan this month. They will probably set tight fiscal policy targets, which will boost the bond market," said Erdinc Mogol, manager in treasury marketing unit at Akbank.

Prime Minister Tayyip Erdogan said last week that energy prices would rise by 10-15 percent in early October in a further move to try and curb a widening budget deficit.

Last month Finance Minister Mehmet Simsek told Reuters Turkey was very likely to miss its budget deficit target of 1.5 percent of GDP this year, and the government was looking at corrective measures including spending controls.

"These (energy) measures will (dampen) market worries about the budget deficit. I expect positive sentiment to come back in the next two to three months," Mogol said.

National inflation figures for September will be released on Wednesday. Currently, annual inflation stands around 9 percent, declining from above 11 percent in April. The central bank's inflation target is 5 percent for 2012 and 2013.

Gizem Oztok Altinsac, economist at Garanti Securities, estimated the energy price hikes would add 0.45 basis points to inflation.

"We will revise our 2012 inflation forecast after Wednesday's data," she added.

Istanbul inflation data is due on Monday. The lira traded flat at 1.7965 against the dollar and at 2.0530 against its euro-dollar basket .

The main share index was 0.3 percent lower at 66,197 points, slightly underperforming a fall of 0.14 percent in the MSCI emerging markets index .

(Writing by Seltem Iyigun; Editing by John Stonestreet)

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

Keywords: MARKETS TURKEY/