Does the auction cycle have an effect on the momentum strategies in Turkish bond market?

A momentum strategy is applied on the 5-year and the 10-year maturity Turkish bonds between March 2010 and August 2017 with various look-back periods. The U.S. 10-year maturity bond yield and the Istanbul Stock Exchange 100 total return index are found to be the best performing momentum indicators. There is an improvement of 10.46% annual return while using the U.S. 10-year maturity bond yield as the momentum indicator. Because of the liquidity-thin emerging markets' supply pressure of public debt, the debt auctions need further attention. After a minor change to Beetsma et al. (2016a, 2016b, 2018) methodology, the treasury debt auction cycle effect is calculated for the 5-year and 10-year maturity Turkish bonds. In accordance with the auction cycle effect, the employed simple momentum strategy is adjusted. This new adjusted momentum strategy improves annual returns between 0% and 6.90% (%3.5 on average) across all the momentum indicators and the look-back periods. The time series momentum is found to be existent in the Turkish bond market from March 2010 to August 2017. In addition, the supply side pressure by the treasury auctions has a delaying effect on the time series momentum. Employing the other momentum indicators performs better than the bond momentum itself. The adjusted momentum strategy enhances the annual returns up to 11.46%.