Briefing Romania

Somewhat counterintuitively, the EUR/RON re-tested to the upside yesterday, trading close to 4.7800 once again. The relatively low turnover doesn’t suggest strong underlying pressure, hence we expect the same 4.7700-4.7800 range to hold today.

We didn’t get it quite right on yesterday’s primary auctions outcome. The 6M T-bills were rejected by the Ministry of Finance, probably as the total demand didn’t cross the targeted RON500 million. The Sep-2023 auction on the other hand came in remarkably successful demand-wise, with RON1.75 billion in total demand, for the RON500 million targeted. In the end, RON 1.16 billion has been allocated at 4.07% average and 4.09% maximum yields, slightly better than we had expected. Otherwise, the secondary market activity remained subdued.

The downside move in cash rates accelerated yesterday and short-term rates closed only marginally above 3.00%. The drop in funding matched a drop in the longer tenors as well, though to lesser extent. Overall, we maintain our call for a gradual but relatively slow improvement in liquidity conditions.