Romania's Treasury counts increasingly on retail investors for deficit financing

Romania's government raised RON 14 billion (EUR 2.8 billion) with its bond issues dedicated to resident retail investors under the Fidelis and Tezaur schemes this year alone - out of a total of RON 140 billion (EUR 28 billion) in total public financing in the period, according to Treasury head Stefan Nanu, quoted by Profit.ro.

The volume of bonds sold to retail investors may reach RON 24 billion by the end of the year, according to Nanu.

The yields, of up to 5% for the bonds denominated in euros and 7% for those denominated in local currency, play an important role in the success of the government's issues, particularly as the interest on these instruments is not subject to income tax (unlike the bank deposits' interest rate).

From an "almost insignificant financing source," the local retail investors "became very important in recent years," said Finance Ministry state secretary Alin Andries on the occasion of listing the third issue this year on July 4. The frequency of Fidelis issues will increase from 4 to 6 per year, he added.

The population finances about 20% of the public debt, and Romania intends to reach similar levels, according to the official.

"We know that there is a great potential," he concluded.

Romania's public debt reached RON 845 billion (EUR 169 billion) at the end of March, and 20% of this would be RON 169 billion (EUR 33.8 billion) – roughly four times the stock of outstanding government bonds sold to retail investors at this moment.

Since the first such issue in August 2020, the Romanian government has raised RON 31.6 billion, according to Economica.net. Out of these, RON 21 billion worth of bonds are still outstanding.

The total volume of government bonds still outstanding was estimated by Andries at RON 42 billion (EUR 8.4 billion), equally split between Fidelis and Tezaur schemes. At mid-2023, the stock of such bonds was RON 29.3 billion, and it increased, according to the latest official data available, to RON 36.6 billion at the end of March 2024.

As opposed to Fidelis, the bonds issued by the Treasury under the Tezaur scheme are listed at the Bucharest Exchange.