Romania’s Treasury begins complicated year with early FX bond issues

Romania issued USD 3.75 bln of FX bonds with maturities of 5, 10 and 30 years on January 7, as the first move in a year when the country’s financing needs remain high at RON 160 bln (EUR 32 bln) even if the Government manages to keep the public deficit at 4.4% of GDP.

The Finance Ministry initially announced a target volume of up to USD 4 bln and said that part of the money would be used to redeem in advance the issues maturing in August (USD 1.28 bln) and January 2024 (USD 0.88 bln).

Romania plans to issue some EUR 11-12 bln worth of FX bonds this year (more than hinted a couple of months earlier) in an attempt to ease the pressure on the local market.

Ştefan Nanu, State Treasury head, told Bloomberg that the financing should not put pressure on local investors and that Romania will continue to rely on foreign borrowing for a large part of the funds it needs. On the day the FX bonds were launched, the yield on 10-year bonds denominated in local currency fell by 15bp to 8.23%.

The USD issues were heavily oversubscribed, with the investors placing orders summing up to USD 11 bln with a particular interest for the 30-year maturity, according to Ziarul Financiar.

The Romanian Treasury eventually raised EUR 1 bln at mid-swap plus 280bp for the 5-year maturity, EUR 1.5 bln at mid-swap plus 350bp and for the 10-year maturity, and EUR 1.25 bln at mid-swap plus 385bp for the 30-year maturity.

Hungary issued on January 4 FX bonds with the same maturities (and roughly similar size) at spreads of 240bp, 280bp and 325bp, respectively, according to Budapest Business Journal.

(Photo source: Dreamstime.com)