Briefing Romania

The EUR/RON was very stable yesterday, fluctuating within 20 pips on below average turnover. Some selling interest could still occur for the usual monthly payments to the state budget, but with the pair virtually floored at 4.7200, we don’t expect a change in the current range.

The flattening along the curve continued yesterday, with 10Y yields down by another 5-6 basis points and 2-3 basis points at the front end. The end of month usually brings some inflows into the bond market, hence we expect the buying interest to continue.

Cash rates are trading around 2.00% for the beginning of the new reserve period. The entire curve up to 1Y is now below 3.00% and, somewhat surprisingly, even below 2.50% up to 3M. This indicates that despite central bank deposit auctions, the average carry is expected to be well below 2.50% in the coming months.