Friday, November 27, 2009

Romania Sells 1.4 Billion Euros in 1-Year Treasuries


By Irina Savu

Nov. 26 (Bloomberg) -- Romania raised 1.4 billion euros ($2.1 billion) in Treasury bills on the domestic market in the third sale this year to fund a widening budget deficit, the central bank said.

Banks bid for more than the 500 million euros initially planned in the sale of the 4.25 percent bills due Nov. 29, 2010, the Bucharest-based Banca Nationala a Romaniei said in an e- mailed statement today. The bid-to-cover-ratio, which gauges demand by comparing the number of bids to the amount of securities sold, was 1.26.

Romania has turned to the domestic market for funding as the recession swells the budget deficit to an estimated 7.3 percent of gross domestic product this year from an earlier forecast of 4.6 percent. A government collapse in October prompted the International Monetary Fund and the European Commission to delay payments on a 20 billion-euro international package of loans.

“The amount attracted is a bit above expectations; still even after today’s deal the finance ministry has to attract before year-end additional 2.5 billion to 3.5 billion euros to finance the budget gap,” Nicolaie Alexandru-Chidesciuc, the chief economist at ING Bank Romania SA, said in an e-mail after the sale. “The upward pressure on local currency yields is here to stay.”

Yield Pressures

Political instability in the country has also prompted investors to demand higher yields than the administration is willing to pay for leu-denominated treasuries. The finance ministry sold only 909 million lei ($320 million) in bills and bonds in November, less than the 6 billion lei initially planned, as investors demanded yields higher than the 10 percent it was willing to pay. The government has already sold 1.24 billion euros in three- and four-year 5.25 percent bonds in August and early November to cover its financing needs.

“We expected a lower yield versus the previous actions -- we said around 4 percent -- given that the tenor is just one year,” Chidesciuc also said.

The yield on the benchmark international sovereign debt due June 2018 was little changed at 6.346 percent, while the Romanian leu weakened 0.5 percent to 4.28212 per euro as of 4:08 p.m. in Bucharest, according to Bloomberg data.

Romania also postponed until next year a planned sale of as much as 1.5 billion euros in bonds abroad, Deputy Finance Minister Bogdan Dragoi said on Nov. 12.

The European Union’s second-poorest member nation is now run by an interim government with limited powers after Prime Minister Emil Boc’s Cabinet lost a no-confidence vote on Oct. 13. Romanian voters will elect a president in a Dec. 6 election that will determine who selects the next government to pull the nation out of a recession. Incumbent president Traian Basescu will face opposition leader Mircea Geoana in the run-off next month.

To contact the reporter on this story: Irina Savu in Bucharestisavu@bloomberg.net.

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