Tuesday, February 5, 2013

Romania’s Borrowing Costs Fall at 11th Consecutive Debt Auction

By Irina Savu & Andra Timu - Feb 4, 2013 

Romania’s borrowing costs fell at the 11th consecutive government auction today as the nation’s inclusion in emerging-market bond indexes from March boosted investors’s appetite for the country’s debt.

The Finance Ministry raised 500 million lei ($156 million) in one-year bills and 737 million lei in three-year bonds today, the central bank said on its website today. Yields declined to 5.51 percent for the 2014 securities and to 5.69 percent for the three-year notes. That compares with an average yield of 5.85 percent for T-bills and 5.95 percent for similar maturity bonds sold on Jan. 14.

Romania’s local bonds and currency have rallied over the last two months after general elections held on Dec. 9 ushered in greater political stability and JPMorgan Chase & Co. and Barclays Plc said some of the country’s securities are eligible for entry in their emerging-market government debt indexes.

“The next month and a half are going to bring a firmly positive story for leu assets, whether local bonds or the currency,” analysts at Societe Generale SA, including Guillaume Salomon, wrote in a note before the sale.

The leu appreciated as much as 0.3 percent before trading little changed at 4.3719 per euro by 4:20 p.m. in Bucharest. It gained 3 percent in December and January. Yields on euro- denominated bonds due 2019 rose eight basis points, or 0.08 percentage point, at 4.211 percent.

“We expect the leu to gain vigor on local bond inflows,” Bucharest-based analysts at BRD-Groupe Societe Generale SA (BRD) wrote in a note to clients today.

The inclusion in the JPMorgan index would be phased over a three-month period ending May 1, the bank said on Jan. 15. The weighting on completion is estimated at 0.54 percent of the GBI- EM Global Diversified Index.

Romania’s October 2015, January 2016 and July 2017 bonds currently meet the criteria for index inclusion as they demonstrate the highest degree of liquidity, according to JPMorgan. Its entry is “subject to final determination,” JPMorgan said.

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

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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