Wednesday, February 29, 2012

Romania Reopens 10-Year Dollar Bond Sale at Lower Yield

Feb. 28 (Bloomberg) -- Romania sold more 10-year dollar- denominated bonds four weeks after it raised $1.5 billion in its first sale of debt in the U.S., taking advantage of falling yields.

The country raised $750 million in the reopening of bonds due 2022 priced to yield 6.45 percent, the Bucharest-based Finance Ministry said in an e-mailed statement. The initial yield for the notes that drew $3.2 billion in bids was set at around 6.5 percent, lower than the 6.875 percent for the bonds sold last month.

“We reopened the issue because there was still demand for Romanian bonds, as investors wanted exposure to Romania, so we decided to take this opportunity to raise funds at a lower cost,” Finance Minister Bogdan Dragoi said in the statement.

The dollar-bond sale is part of a medium-term note program valued at 7 billion euros ($9.4 billion) that's designed to help the government sell debt quickly anytime as it seeks to benefit from lower borrowing costs as the European sovereign-debt crisis eases.

“We see the decision to reopen the sale as positive, since it's consistent with the government's commitment to improve the liquidity,” said Raffaella Tenconi, an economist at Bank of America Merrill Lynch in London. “The timing is ideal.”

The cost of insuring against a default by Romania has declined 46 basis points to 353 basis points today from 399 on Jan. 31, below the five-year credit-default swaps of 513 for neighboring Hungary, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

ECB Liquidity Boost

The sale comes as the European Central Bank prepares to allot 470 billion euros in a second round of three-year funds tomorrow to boost liquidity of the single-currency region's banks, according to a Bloomberg News survey. Using the longer- term refinancing operations, banks can borrow from the ECB at around 1 percent and invest the proceeds in higher-yielding securities.

The yield for Romania's dollar bonds issued in January and due in 2022 reached a record low yesterday of 6.279 percent and increased 10 basis points today to 6.373 percent.

The country plans to borrow as much as 2.5 billion euros of bonds on foreign markets in 2012 through two debt issues after it stopped relying on international bailout funds. The sales will help to narrow the budget deficit, which the government wants to shrink to 1.9 percent of gross domestic product this year, from 4.35 percent in 2011.

Citigroup Inc., Deutsche Bank AG and HSBC Holdings Plc managed the dollar-bond sale.

--Editors: James Kraus, Fergal O'Brien

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