Romania has tapped the market by re-opening its 10-year Eurobond issued in April to collect another €1bn, the finance ministry announced. 

The yield was 2.114%, versus 2.411% in April, the ministry said, stressing that this was the lowest borrowing cost abroad Romania has ever paid for this maturity: 128bp above mid-swap, versus 170bp in April. At the same time, the yield was half the yield expected by investors for local currency and same maturity.

On the local secondary public debt market, the fixing quotations for local currency, 10-year maturity state debt increased to 4.3%/4.1% this week, some 40bp up from the average quotations in April (to stick with the Eurobond issue timing). The average quotations for the same maturity were at a past-years minimum of 3.0%/2.8%, namely 130bp lower, in September 2016.

Interest rates have increased significantly on the local market on the back of uncertainties generated by the government’s ambiguous, but risky, fiscal policy. 

The Treasury rejected all the offers made by banks in the previous two issues with residual maturities of 17 and 79 months. In the latest long-term bond placed on the local market on September 13, the Treasury had to pay 3.9% yield for 10-year debt. 

At that time, the quotations on the secondary market were 4.0%/3.8%. The implied 4.2% yield expected by investors for local currency government debt with 10-year maturity at this moment is double the cost of the foreign currency debt issued under same terms by the same government, implying expectations of a combination of currency weakening and higher interest rates on the local market.

Around 140 investors with different profiles and from various regions of the world placed orders of over €2bn for Romania’s Eurobonds within three hours, the finance ministry said, highlighting the robust demand.

The geographical distribution of the investors was as follows: Romania (18%), UK (17%), Central and Eastern Europe (17%), Germany / Austria (14%), France / Benelux (10%), Italy (6%), Switzerland (5%), the US (4%), Scandinavia (3%) and other countries (6%). 

In terms of types of investors, fund managers predominated (63%), followed by commercial banks and private banks (24%), pension funds and insurance companies (9%), and central banks and official institutions (4%).