Snaps
23 August 2019

Briefing Romania

Short lived liquidity squeeze

Romania_in_Europe.jpg

 - Source: Reuters
Source: Reuters

EUR/RON

With bond inflows muted these days and no major data on the calendar, the Romanian leu traded fairly stable against the euro, closing just above 4.7200. The leu’s regional peers seem to be losing some ground, hence we’d expect a return towards 4.7300.

Government bonds

The profit taking sweeping through the region continued to hit Romanian government bonds as well, though to a lesser extent than in the previous session. The yield curve shifted another 1-2 basis points higher on light trading. The RON500 million Feb-2029 auction came in strong demand-wise but with bids a touch more defensive than we had expected. The target size was allocated at 4.06/4.08% average and maximum yields. Breaking below the 4.00% level is still within reach but a lot will depend on today’s Jackson Hole meeting.

Money market

Cash rates continue to be squeezed due to the uncertainty regarding the timing of budget payments and the likely overbidding of the last NBR deposit auction. A return of the RON11 billion on Monday will likely ease the front end though the current 1W-2W implied yields above 3.00% suggest that the liquidity situation will improve more markedly only towards the end of first half of the next reserve maintenance period.

 - Source: Reuters, ING estimates
Source: Reuters, ING estimates