Briefing Romania

Despite somewhat heavier turnover, nothing seems to trouble the Romanian leu these days. The EUR/RON traded in the same 30-40 pips range yesterday, only briefly touching 4.7650 and returning to its comfort zone around 4.7620. We expect more of the same for today.

A sort of “zen” mood prevails in Romanian government bonds these days as the curve seems to be adjusting very gently higher, without much noise, or even trading. Today, the Ministry of Finance plans to sell RON300 million in September-2031 bonds, a quite illiquid ISIN on the secondary market. The real end-user demand is the only one driving the price right now, hence the allocation could surprise to the downside in terms of yields if such demand shows up. Seeing it again at last month’s average allocation of 5.21% would be quite a positive surprise though.

Today is the last day of the reserve maintenance period, hence the front end implied yields have already started to adjust to the higher expected carry. The market however doesn’t seem to anticipate a liquidity squeeze anytime soon, as all tenors covering the next reserve maintenance period are trading somewhere between 2.85% and 3.25%, which is quite reasonable we would say, given the hawkish central bank rhetoric.