Politically-induced shock on Romania’s markets continues: weaker currency, higher interest rates

The local currency kept losing ground on May 9 despite reported interventions by the central bank.

The interest rates rose, and the Stock Exchange’s indices resumed the decline on May 9 after a modest gain on the previous day.

The development suggests a drain on liquidity from the money market, possibly amid hybrid interventions by the National Bank of Romania (BNR) to support the local currency exchange rate.

# Yields of Romanian 10-year Govt. Bonds are up 1pp over the past two weeks, to 8.55%/8.32% # The average interest rate on interbank transactions rose to 6.21% on May 7, up from around 5.6% a week ago # Local currency weakened by 2.9% versus the euro since before the first round of the presidential elections # Bucharest Stock Exchange’s BET index plunged by 4.85% w/w on May 8, after a 1.79% d/d decline

After it failed to sell 4-year bonds this week, the Romanian Treasury managed to place RON 500 million (EUR 100 million) of 8-month treasury bills on May 8 at an average yield of 8.21% (maximum accepted yield 8.32%).

(Photo: Henning Marquardt/ Dreamstime)