Briefing Romania

It was more of the same for the EUR/RON, which again floated in a tight 20-30 pips range above 4.7300. It’s summer and it’s Friday, so what we expect for today? Yes, more of the same.

As expected, the RON300 million Oct-2020 auction came in strong demand-wise. The Ministry of Finance allocated the target amount out of RON1.02 billion in total demand at 3.28/3.29% average and maximum yields, in line with our view. Otherwise, there was a mild bull flattening on the curve, which should continue today as well in the light of the re-amplified market expectations for Federal Reserve rate cuts.

Cash rates reached the 1.50% deposit facility yesterday where they should stay until the end of the current reserve period – 23 July. The longer tenors have again inched a bit lower, with only the 9M and 1Y points now still trading above 3.00%. This shows quite a high degree of market confidence for carry to stay anchored at or below the key rate for an extended period – which we expect as well.