Briefing Romania

As expected, the market was little moved by the presidential election results, with the EUR/RON trading quite stable around 4.7740. Yesterday, the finance minister Florin Citu was cited by Bloomberg saying that the 2019 budget deficit could exceed 4.0% of GDP, while next year's deficit will come closer to 3.0%. Consequently, we might see some more depreciation pressure on the local currency.

Yesterday’s Sep-2023 auction came in very solid. At 3.92% average and 3.94% maximum yields, the Ministry of Finane was able to allocate RON1.05 billion versus the RON400 million initial target, from a total bid-to-cover of 4.6x. Today we might see some reaction following MinFin’s announcement regarding the budget gap (and hence, increased funding needs for the rest of the year), though the market seems to have been rather complacent about it so far.

Cash rates traded around 3.00%, with the entire curve up to 1Y looking extremely flat right now. The NBR’s deposit auction drained RON1.35 billion from six banks, in line with our expectations for limited interest. The market should remain wary as the liquidity surplus should be tapped in one way or another by the MinFin.