Friday, May 15, 2009

Romania sees improved conditions for Eurobond issue

BUCHAREST, May 14 (Reuters) - Funding costs for a potential Romanian Eurobond issue have improved since Bucharest secured a 20 billion euros IMF-led loan package in March, a finance ministry official said on Thursday. 
While the ministry said a Eurobond has always been an option to cover funding needs this year, analysts said the comments raised the likelihood of an international bond being sold this year, which could help take pressure off the local debt market.

The finance ministry has cranked up domestic issuance this year, selling around 31 billion lei so far, from last year's 12.5 billion lei, as the government struggled to meet vast spending needs and settle massive 2008 invoices.
"The option to get funding through a Eurobond issue was always considered from the point of view of public debt strategy, even before the loan agreement," Stefan Nanu, head of the finance ministry's treasury department, told Reuters.

"What is new is that we are noticing a clear improvement in funding conditions through Eurobond ... which shows investors' trust in the Romanian economy." Nanu declined to comment on Romania's immediate issuance plans.
Elsewhere in the region, Hungary's debt agency said on Thursday that several foreign investment banks have approached it in the past several weeks encouraging Hungary to issue a Eurobond as sentiment across central Europe improved.

Romania launched its first Eurobond in five years in June 2008, selling 750 million euros worth of 10-year paper.
Since then, two ratings agencies have placed Romania below investment grade, saying its large twin budget and foreign deficits left it vulnerable to a potential funding crisis.

Romanian treasury yields jumped to as high as 14 percent in January when market sentiment took a dramatic dive, but have held virtually flat at about 11.50 percent across the curve since February. They started to ease slightly earlier this month, as investors took a kinder look at Romania.

"The ministry's statement seems to support previous comments that it will not need local currency debt issuance as much as it did," said Vlad Muscalu, economist at ING Bank in Bucharest.

"This might be slightly positive for bonds, yields could ease slightly."

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