Romania’s Treasury on May 12 placed RON540mn (€100mn) of government bonds on the domestic market at an average yield of 8.45% by re-opening an issue that matures at the end of July 2026, according to the National Bank of Romania (BNR).

Romania’s yield curve (chart) shifted upward and its slope turned negative compared to two weeks ago (April 28), before the landslide win of the far-right presidential candidate George Simion in the first round of the presidential elections.

The yield is 1.5 percentage points (pp) up from roughly two weeks earlier, when the Treasury paid 6.96% for the RON662mn (plus RON150mn in the non-competitive supplementary issue) by reopening the same bond on April 28.

The rise in yield for the bonds with a maturity of just over one year (14 months), almost 1.5pp compared to two weeks ago, reveals the upward shift of the yield curve that has also changed its shape from a couple of weeks earlier turning into a slightly inverted (negative) pattern.  A negative slope is typically prompted by expectations of slower economic growth or even recession. 

The spread between the yield on 10-year and three-year yields (bid, chart) turned from +33 basis points (bp) on April 28 to -35bp on May 12. On May 12, the spread between 10-year and six-month yields was also negative at -30bp.

On the upside, the 14-month issue on May 12 was significantly oversubscribed as the banks placed orders for RON1.345bn of bonds (2.7x the target) after the more modest 1.2x oversubscription rate in the eight-month issue (only 8.21% average yield, though) last week that followed a failed four-year issue immediately after the first round of the presidential elections.

When it comes to the yield of the 10-year Romania bonds, in terms of bid fixing quotations, it increased to 8.2% on May 12 from 7.52% on April 28, after peaking above 8.5% on May 8-9, reaching a level not seen since November 2022 when sentiment regarding the economic outlook deteriorated significantly in the wake of the war in Ukraine and high energy prices.