Also, analysts estimate an inflation rate of 2.5 per cent next year.
Foreigners could start buying Romanian bonds again after a reduction of exposure that started last autumn and intensified this spring, Erste analysts estimate, taking into account the effects of some monetary stimuli from the Fed and the European Central Bank (ECB) on the Romanian economy, an Erste-BCR analysis shows, Mediafax informs. Based on recent statements made by some Fed and ECB officials, the analysts estimate a possible relaxation of the monetary policy in the US and the Euro Area by the end of this year. The ECB’s next monetary policy meeting is scheduled on September 6, while the Fed will take a decision on September 12-13.
At the same time, if foreigners start buying Romanian bonds the depreciation pressures on the RON could ease, so that the exchange rate could remain in the RON 4.4 – 4.6/EUR interval, the analysts say. Erste-BCR analysts also believe that a Finance Ministry Eurobond issuance could “further help” the RON because it would consolidate the National Bank of Romania’s (BNR) forex reserves. “The disappointing results in absorbing European structural funds (just EUR 710 M in H1 of 2012) and the start of reimbursements towards the IMF should be counterbalanced by higher forex inflows from privatizations. A RON appreciation below 4.4 is not entirely ruled out and the short EUR long RON positions (that would stake on a RON appreciation – editor’s note) would be a good strategy at that moment,” the analysis shows.
At the same time, the analysts believe that new monetary stimuli from the Fed and the ECB would allow the Finance Ministry to issue Eurobonds worth at least EUR 1 bln in order to finance the budget deficit and to refinance the public debt.
Thus, the Finance Ministry could reduce its offer of RON-denominated bonds on the local market and at the same time would avoid a powerful hike when it comes to yields.
“A certain stabilization of the internal political environment, at least until the general elections scheduled on December 9, has a special importance. We estimate a yield of 6.8 per cent for 5-year state bonds in December in a scenario that takes into account a Eurobond issuance. If the Finance Ministry does not issue Eurobonds by the end of 2012 the 5-year yields could stand at 7.1 per cent in December 2012,” the analysts note.
Likewise, Erste-BCR analysts estimate an inflation rate that would surpass the BNR target of 3 per cent (+/- one percentage point) and an inflation rate of 2.5 per cent (+/- one percentage point) next year. In this situation BNR would maintain the monetary market’s interest rates at high levels and “would favor” a slight RON appreciation in order to reduce inflationary pressures.
RON starts to depreciate, BNR reference exchange rate climbs to RON 4.4898/EUR
Half-way through the trading day yesterday the exchange rate on the interbank market was fluctuating around RON 4.49/EUR, after going slightly over RON 4.46/EUR on Friday, so that the National Bank of Romania (BNR) published a reference exchange rate of RON 4.4898/EUR.
Dealers state that the market was dominated by EUR orders and the appetite to buy foreign currency will continue if the interest rates remain low. The banks’ interest rates for ROBID and ROBOR one-day deposits stood at 4.93 – 5.43 per cent per year, slightly higher than those registered on Friday (4.88 – 5.38 per cent). At the same time, one-week yields stood at 5.08 – 5.58 per cent per year.