Romania Briefing

EUR/RON closed flat yesterday around 4.7430, with no particular sense of direction during the day. The turnover and volatility remained low. Should the depressed carry rates persist, we would expect a test higher for the EUR/RON in the coming days.

The RON400 million June 2023 bond auction was a success. The Ministry of Finance upsized to RON635 million at a 4.08% average and 4.09% maximum, very close to our expectations. Demand was strong, with a bid-to-cover at 1.92x and bid-to-target at 3.05x. The market continued to be upbeat on Romanian government bonds and pushed yields 5-7 basis points lower at the front end while the back-end followed the move to a lesser degree.

The market apparently doesn’t have any appetite to wait until Monday when the National Bank of Romania might organise a deposit sterilisation auction at the key rate. Funding rates inched towards the deposit facility yesterday, closing the day around 1.65%. Everything covering this reserve period is actually trading below the key rate, suggesting that the market isn't pricing in any NBR deposit auction in the coming weeks. The NBR Monthly Bulletin showed a daily average liquidity deficit during February of RON2.5 billion from a surplus of RON5.9 billion in January.