Briefing Romania

The EUR/RON traded in a narrow range again but with a slight upside bias as the 4.7600 level starts to act as support. Absent any major shock, we should see the pair in the 4.7600-4.7650 range today, while testing 4.7700 looks to be in sight again.

Weak inflation numbers prompted a readjustment in Romanian government bonds, which shifted some 4-5 basis points higher in a bear flattening move. As a result, the RON500 million June-2024 bond auction came in marginally higher-than-expected, with 4.46% average and 4.48% maximum yields and a total bid-to-cover of 1.34x. The Ministry of Finance allocated RON424 million which makes for a reasonable result considering yesterday’s context of worsening risk sentiment and higher inflation data.

The central bank’s one week deposit taking auction has been met again with great prudence by local banks, which placed RON2.9 billion at the key rate level. In our view, the system’s liquidity surplus could have allowed for a higher amount, as indicated by the overnight rate, which dipped below 2.00% towards the end of the trading session.