Tuesday, March 17, 2009

Romania sells 2 billion lei in 6-month T-bills

03.16.09, 01:35 PM EDT

BUCHAREST, March 16 (Reuters) - Romania topped up this year's vast treasury issuance with a 2 billion lei ($604 million) sale of 6-month T-bills on Monday, underscoring a huge thirst for cash that has pushed it to seek aid from the IMF.

The auction brought sales so far to 20 billion lei, nearly double last year's bill of 12.5 billion as Bucharest's government struggles to meet vast spending needs and settle nearly 8 billion lei worth of invoices left from last year.

Market observers say issuance may thin out later this year if Bucharest's centre-left government succeeds in striking an aid agreement with the International Monetary Fund, likely worth up to 20 billion euros.

The finance ministry's annual issuance plans call for an overall figure of 30 billion lei.

'If Romania gets access to foreign funding it is possible that pressure on domestic funding eases,' said Ionut Dumitru, head of research at Raiffeisen Bank in Bucharest.

An IMF mission arrived in Bucharest last week to hold loan talks and it is due to leave town later this month.

Few details are available so far other than the government's statement that it has approached the Fund and the European Union for help to avoid a financing crisis in what would make it the third bloc member to look for outside help.

Higher issuance has had little impact on prices, with demand from local banks remaining strong as many buyers use state debt as collateral for liquidity help from the central bank.

Treasury prices have gone up in recent months, with yields falling to 11.49 percent on average on Monday from more than 14 percent in December.

'Banks buy treasuries from the finance ministry, they go with them to the central bank and get liquidity via repo operations,' said Nicolaie Alexandru-Chidesciuc, senior economist at ING (nyse: ING - news - people ) Bank in Bucharest.

Details of the auctions can be found on page.

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