Briefing Romania

Somewhat higher turnover and deteriorating risk sentiment supported extended trading above 4.7600 for the EUR/RON. With markets still on the defensive today, we look for the 4.7600 to become more of a support level.

Take what we wrote yesterday and read it the other way around. This should yield a more accurate picture of yesterday’s primary auction results. The RON400 million 1Y T-bills auction was met with scepticism (to say the least) by the market, as total demand barely covered the target size while yields have been quite a bit above our call. The Ministry of Finance allocated RON274 million at 3.26% average and 3.32% maximum in what can be called, at best, a pretty weak auction.

The RON 400 million 10Y auction on the other hand came out very solid, meeting RON1.22 billion total demand. Yields remained below the 5.00% mark which seems to act as a trigger, gathering stronger bids when yields get close to it. The Ministry of Finance allocated RON535 million at 4.96/4.97% average and maximum, with post-auction trading pushing the yield into the lower end of the 4.90-5.00% interval.

Not much happening in the funding market as the local players are likely waiting to park their surplus liquidity at the central bank’s 2.50% key rate on Monday instead of 2.00-2.10% where funding rates currently trade. That, of course, if the National Bank sticks to its strict liquidity control and organises a deposit auction on Monday, which we expect to happen.