Briefing Romania

The EUR/RON returned above 4.6500 yesterday, possibly on the back of lower carry which incentivizes buyers. We maintain our call for a gradual move to the 4.6700 area towards the year-end.

The better than expected inflation numbers reignited a buying spree for ROMGBs yesterday. The back-end of the curve had most to gain as yields dropped by as much as 15 basis points in some ISINs. Front-end bids were also supportive, pushing the curve c.4-5 basis points lower. The five-year euro-denominated auction came in as expected, as demand was broadly in line with the 6 November auction, when all bids were rejected. This time, the Ministry of Finance allocated EUR251.5 million at a 0.95% average and 0.96% maximum versus the initial EUR200 million target.

The overnight implied yield dropped again and is now trading at the 1.50% deposit facility as liquidity conditions are overly supportive. Tenors above 1M remained unchanged, possibly on expectations that the current soft stance in cash rates won’t last too long.