Romania’s Treasury forced to rely on costly short-term financing

Romania’s Treasury forced to rely on costly short-term financing
By bne IntelliNews February 13, 2018

Romania’s Treasury issued bills on February 12 for the first time since last September, when short-term interest rates began to rise. The Treasury issued RON400mn worth of bills with a maturity of 12 months. 

Four issues with the same maturity have been canceled since September, as banks’ expectations were seen by the government as too high. But between the widening budget deficit and rising interest rates, the Treasury is under increasing pressure to raise funds.

After longer-term debt became expensive as well (the yield for the April 2024 bonds rose to 4.35% this February from 4.05% in December), the Treasury agreed to pay a 2.42% yield for the one-year papers (versus 0.79% in August) at the February 12 auction.

In related news, the cost of money kept increasing, rising by 2bp since the end of last week with the six-month quotations marginally up to 1.87%/2.36% on February 12. The quotations for 12-month funds also increased slightly to 1.97%/2.46%.

The Treasury also tapped the local market on February 12 by re-opening a long-term bond maturing in September 2031 (163 months residual maturity) and rising RON100mn at 4.75% yield (versus 4.12% last June). The Treasury is also considering issuing euro-denominated bonds (€200mn) as an alternative to the increasingly costly local debt, Ziarul Financiar daily reported.

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