Erste Group predicts further Romanian euro bond sale this year

Analysts from Erste Group, the owners of Banca Comerciala Romana (BCR), predict that Romania could hold another euro-denominated bond auction this year after the recent successful sale. Romania recently raised EUR 750 million, with 5.1 percent yields in the bond auction, which was over-subscribed by investors. “After the success of euro-bond sale this week, when foreign investors heavily oversubscribed and attracted EUR 750 million at a reasonable return of 5.1 percent, we do not exclude the possibility that the Ministry of Finance will test international waters again later this year,” says a report by Austrian Erste Group analysts, quoted by the local media.

Commentators consider that the decision to hold the sale before the pivotal European Central Bank announcement was no accident and the Ministry of Finance managed to take advantage of favorable market conditions with the sale of bonds, which mature in June 2018. The sale attracted offers of EUR 3.6 billion and the largest share of bonds were bought by UK investors, 33 percent, while 22 percent went to Austria and Germany. A further 36 percent went to the rest of Europe and 9 percent were sold to investors from other parts of the world. According to Erste Group analysts, there are two implications of the successful bond sale. First that a reduce in the supply of bonds to the domestic market is possible, with the Ministry of Finance already having raised 75 percent of its target figure for this year and a further euro-bond auction on the cards. Secondly, Romania's National Bank may be in a stronger position to support the local currency, the leu, after increasing reserves. Liam Lever, liam@romania-insider.com