Tuesday, December 14, 2010

Romania Sells More Debt Than Planned on Sentiment

Dec. 13 (Bloomberg) --Romania sold more debt than planned at an auction today as a drop in the inflation rate and government austerity measures boosted investor sentiment.

The Finance Ministry sold 1.47 billion lei ($454 million) of one-year Treasury bills, more than the 1 billion lei it initially intended to sell, the Banca Nationala a Romaniei said on its website. The average yield dropped to 7 percent from 7.22 percent from the last auction of similar notes on Nov. 22. Demand was 3.98 billion lei.

“The result of the auction is a bit surprising because we expected to see a yield closer to 7.2 percent,” said Florentina Manea, an economist at Royal Bank of Scotland Romania SA. “The sentiment has improved compared with other countries in the region, especially Hungary, because investors are pleased with the government’s effort to push through tough reforms.”

The Balkan nation, which is relying on a 20 billion-euro ($26.6 billion) bailout led by theInternational Monetary Fund to stay afloat, has managed since November to sell leu- denominated bills and bonds on the domestic market as it dropped a self imposed 7 percent yield cap.

Investors had pushed for higher yields after a 5 percentage-point increase in a value-added tax in July spurred inflation to the fastest pace in more than two years. The inflation rate dropped in November for the first time in five months to 7.7 percent from 7.9 percent in October.

“The result today is pretty good for the Finance Ministry and the cost of the debt sold is below our estimates,” Vlad Muscalu an economist at ING Bank in Romania, said in a phone interview. “The market probably thinks that they won’t manage to find such attractive instruments six-months from now, and that’s why they are willing to accept a 7 percent yield.”

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net; Irina Savu in Bucharest at isavu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez in Prague atjagomez@bloomberg.net

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