Romania's cost of 10-year public debt up 24% YTD

The interest rate for Romania's 10-yr local currency sovereign debt has increased by about 24% since the beginning of the year, according to BCR Research quoted by daily Bursa.

Compared to the peers in Central and Eastern Europe (CEE), the Romanian Government bonds performed weaker since the beginning of the year amid external drivers (inflation outlook, concerns about the spread of the Covid delta variant) but also domestic drivers: domestic inflationary pressures resulting from the liberalization of electricity and gas prices, as well as recent political noise.

The real 10-year inflation-adjusted yield is still negative (about -0.6%), but much less negative than in Poland (-2.78%) - signifying comparatively higher borrowing cost faced by the Government.

"Thus, sovereign yields in RON posted the second-highest increase in the CEE area since the beginning of the year (+72 basis points), Hungary registering the highest increase (+82 basis points) due to the increase of the key rate by the bank," according to BCR analysts.

However, the slope slightly sweetened last week. The slope of the government bond yield curve turned steeper since the beginning of the year, mainly due to the decline in short-term rates driven by excess liquidity, while the price of long-term securities suffered correction driven by external factors.

The difference in yield between 10-year and 3-year lei bonds decreased by 7 basis points compared to last week, reaching 94.9 basis points.

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