Monday, May 21, 2012

Romania Plans Third-Quarter Bond Abroad as Leu-Debt Sales Shrink

Romania plans to sell international bonds in the third quarter and scale back domestic debt issuance after a record first three months as speculation Greece will exit the euro roils markets, a Finance Ministry official said.

The eastern European nation, which raised a record 26 billion lei ($7.5 billion) at home in the January-March period, retains plans to sell as much as 2.5 billion euros ($3.2 billion) of bonds on global markets this year, depending on market conditions, Deputy Finance Minister Cristian Sporis said.

“We want to be a constant issuer on the international markets,” Sporis said in a May 19 interview in London. “We said we’ll issue 2.5 billion euros this year so we’ll try to issue that amount.”

First-quarter Treasury-bond and bill sales rose more than 50 percent from a year earlier as wage cuts and a tax increase aimed at trimming the budget deficit bolstered investors’ optimism toward the European Union’s second-poorest member. Romania, which exited a 20 billion-euro bailout led by the International Monetary Fund in 2011 after its deepest recession on record, has also raised $2.25 billion abroad this year.

After reaching a year low of 4.4625 percent on April 23, the yield on Romania’s dollar bond due 2015 has jumped to 5.119 percent as investors sell emerging-market assets amid reports Greece may return to the drachma. The cost of insuring government debt against non-payment for five years using credit- default swaps has risen to 431 basis points from a 2012 low of 295 basis points on March 14. A basis point is 0.01 percentage point.
Leu Sinks

The leu has lost 2.6 percent against the euro since January, making it the worst performer among eastern European and African currencies tracked by Bloomberg.

Romania won’t be forced to sell bonds abroad as it has a cushion of about 4 billion euros and is in line for a 1 billion- euro backstop from the World Bank, pending approval at a June meeting of the Washington-based lender, Sporis said.

“We have a buffer and we’re not caught in a corner to issue at any cost, unlike some countries,” he said. The World Bank loan “will be at our disposal any time we want to draw on it, for which we will be paying a commitment fee.”

Romania also has a two-year 5 billion-euro precautionary agreement from the IMF and the EU, which was agreed on last year after the bailout expired.

Domestically, Sporis said Romania will sell less debt after frontloading this year’s plan and will continue offering treasuries with maturities of as long as 15 years.

“We’ll reduce our debt issuance,” he said. “We’re sticking to our plan to lengthen the maturities because we want to avoid repayment peaks in the next three to four years. If we can’t find enough interest on the local market, we can tap the foreign markets if the opportunity arises.”

To contact the reporter on this story: Irina Savu in Bucharest at

To contact the editor responsible for this story: James M. Gomez at

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