Briefing Romania

Increased turnover didn’t necessarily mean increased volatility for the EUR/RON yesterday, which remained in the same 4.7300-4.7350 range for most of the trading session. We expect more of the same for today.

Romanian government bonds have regained some of the lost ground from the previous day but, with moves of one to two basis points, the market clearly lacks a sense of direction right now. Todays’ RON300 million Oct-2020 auction is unlikely to stir things up given its short tenor. Nevertheless we expect good demand for it following the softening trend in cash rates, which the market seems to be pricing in for an extended period. Hence, an allocation below 3.30% looks sensible.

The surplus liquidity pushed front end rates below 2.00% yesterday. The 1.50% deposit facility should become the relevant rate.