Friday, November 26, 2010

Romania Sells 1.32 Billion Euros in 3-Year Bonds; Yield 4.8%

Romania’s Finance Ministry sold 1.32 billion euros ($1.76 billion) in three-year euro-denominated Treasury bonds on the domestic market, the second such auction this year, to fund the country’s budget deficit and refinance 1.4 billion euros due on Nov. 29, the central bank said.

The average yield on the bills due Nov. 29, 2013 was 4.8 percent, the Bucharest-based Banca Nationala a Romaniei said on its website today. Romania had planned to borrow the money at less than 5 percent, President Traian Basescu told public television station TVR on Nov. 18.

Demand at the auction was 2.05 billion euros and the government had originally offered to sell 1 billion euros of the bonds.

The eastern European country has struggled since July to find buyers for its leu-denominated debt on the domestic market as investors pushed for higher yields amid rising inflation forecasts triggered by a government increase in a value-added tax. It sold 1 billion lei ($310 million) in one-year bills this week at a 7.22 percent average yield and rejected all bids at a five-year leu-denominated bond sale on Nov. 18, citing “unacceptable yield bids.”

Central Bank Governor Mugur Isarescu said earlier today that the ministry should repay its 1.4 billion euros due this month as it has sufficient funds to do so and tap the market again afterwards.

“Although issuing more than planned could be seen as a success, in reality it seemed very likely that the whole amount of 1.4 billion euros is to be rolled-over,” ING Bank Romania SA economist Ana-Maria Morarescu

Romania, which relies on a 20 billion-euro bailout led by the International Monetary Fund, dropped this month a self- imposed yield cap of 7 percent for one- and three-year leu- denominated debt, paying as much as 7.3 percent as it seeks to cover its budget deficit of 6.8 percent of gross domestic product.

To contact the reporters on this story: Irina Savu in Bucharest at; Andra Timu in Bucharest at

To contact the editor responsible for this story: James M. Gomez in Prague
wrote in an e-mailed note to clients today before the auction announcement. “It is also interesting to point out that previous one-year paper matures the same day these new papers are scheduled to be issued and this fact hints that the Finance Ministry does not enjoy a comfortable liquidity position.”

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