Briefing Romania

Another quiet day for EUR/RON, with the pair moving within a tight range around 4.7400 on relatively low turnover. For today, we look for the same 4.7400-4.7500 range to hold.

Romanian government bonds yesterday re-gained some of the lost ground from the previous day as the curve shifted lower by three to four basis points. The RON400 million October-2021 bond auction met a very good 2.07x bid-to-cover ratio. The Ministry of Finance upsized to RON543.7 million at a 3.80% average and 3.83% maximum, in line with our call. The market mood seems to be improving by the day as it seems only a matter of time before ROMGBs are excluded from the taxable base of the bank levy.

Cash rates continued to ease and closed the day just below 3.00%. The market seems to be pricing cash rates to remain lower for longer as tenors covering the current reserve period are all trading below 3.00%, but also the 1M-3M curve has moved c.40 basis points lower and is now in the 3.50-3.70% area. We tend to believe that the central bank would not be comfortable with an overly liquid money market and could step in to drain some liquidity at some point.