BriefING Romania

The EUR/RON inched slightly higher yesterday, tracking regional currency pairs, on below-average turnover and closed the day in the upper half of the 4.6600-4.6700 range. The same range is likely to hold today with a likely test to the upper bound as RON’s regional peers are trading at relatively weaker levels against the single currency. With a better mood across the stock market and strong offers seen in the past around 4.6700, this level is likely to hold for some time.

The ROMGBs yield curve bull-steepened yesterday after the National Bank of Romania's repo announcement. Back-end yields adjusted by a couple of basis points lower, while 5Y yields dropped by around 5 basis points as buying interest seems to be clustered on this segment of the curve. The Ministry of Finance yesterday sold RON170 million in 1Y T-bills versus RON600 million auctioned with total demand just below the announcement. As the MinFin decided not to pay up the market, average/cut-off yields printed below our expectations, at 3.46%/3.49%.

The O/N implied yields dropped sharply after the NBR full allotment repo auction announcement, closing the day near 3.05%. The whole money market curve steepened as front-end rates dropped the most after the liquidity injection from the central bank. This was the largest repo allotment on record, with 14 banks taking RON16.7 billion in 1-week at the key rate level of 2.50%. The NBR Monthly Bulletin due 5 November will shed more light on the liquidity backdrop after the large end-October payments to the state budget after the banking system posted an average daily liquidity deficit of RON3.9 billion for September.