Erste: Romania could come out on international markets again this year

Romania could contract loans from international financial markets again this year after the success registered last week when the Finance Ministry borrowed EUR 750 M by reopening the issuance of EUR-denominated bonds with a June 2018 maturity, a report authored by Austria’s Erste Group’s analysts shows. The bank’s economists consider that the Finance Ministry decided to take advantage of the favorable climate ahead of the European Central Bank’s monetary policy meeting. The offer totaled EUR 3.6 bln, from 220 investors. Investors from UK bought 33 per cent of the bonds, those from Austria and Germany bought 22 per cent, those from the rest of Europe bought 36 per cent and those from other regions bought 9 per cent. Fund managers bought half of the total bonds, banks and individual investors bought 23 per cent, insurance and pension fund companies bought 20 per cent, while other investors bought 7 per cent. A certain normalization of the internal political climate played an important role in the success of the operation, Erste analysts add, Mediafax reports.The issuance has two major implications, the Austrian bank’s report points out. After covering 75 per cent of this year’s financing needs and with a new issuance of Eurobonds possible in the following months, the Finance Ministry will be in the position to reduce the offer of RON-denominated bonds on the local market. “Pressure on the yields will be limited and the five-year yields could remain at 6.8 per cent in December,” the report adds. The second implication is the National Bank of Romania’s (BNR) stronger capacity to back the RON after its forex reserves were hiked. Reimbursements towards the IMF, which started in August (EUR 729 M), and the possible interventions in favor of the RON caused a EUR 1.2 bln decline in BNR’s forex reserves in August. The reserves currently stand at EUR 30.9 bln.BNR has to pay another EUR 800 M to the IMF by the end of the year and the Finance Ministry owes EUR 130 M to the financial institution. Moreover, in November the Ministry should buy back EUR 794 M worth of bonds with a three-year maturity. Likewise, Erste estimates an exchange rate of RON 4.55/EUR at the end of the year, reflecting risks generated by the general elections scheduled in early December.The reopening of the issuance was motivated by the fact that a new operation on external markets would have entailed higher costs. In June 2008 Romania sold Eurobonds with a ten-year maturity, obtaining EUR 750 M.

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