Romania’s Treasury on May 12 placed RON 540 million (EUR 100 million) of Government bonds on the domestic market at an average yield of 8.45% by reopening an issue that matures at the end of July 2026, according to the National Bank (BNR).

The yield is 1.5 percentage points up from roughly two weeks earlier, when the Treasury paid 6.96% for the RON 662 million (plus RON 150 million in the non-competitive supplementary issue) by reopening the same bond on April 28.

Romania’s yield curve shifted upward, and the slope turned negative compared to two weeks ago, before the landslide win of the far-right presidential candidate George Simion in the first round of the presidential elections. 

The rise in yield for the bonds with a maturity of just over one year, almost 1.5 percentage points (pp) compared to two weeks ago, reveals the upward shift of the yield curve that has also changed its shape from a couple of weeks earlier turning into a slightly inverted (negative) pattern. A negative slope is typically prompted by expectations for slower economic growth (or even recession). 

The spread between the yield on 10-year and 3-year yields (bid) turned from +33 basis points (bp) on April 28 to (negative) -35bp on May 12. On May 12, the spread between 10-year and 6-month yields was also negative (-30bp).

On the upside, the 14-month issue on May 12 was significantly oversubscribed as the banks placed orders for RON 1.345 billion of bonds (2.7x the target) after the more modest 1.2x oversubscription rate in the 8-month issue (only 8.21% average yield, though) last week that followed a failed 4-year issue immediately after the first round of the presidential elections.

When it comes to the yield of the 10-year Romania bonds, in terms of bid fixing quotations, it has increased to 8.2% on May 12 from 7.52% on April 28, after peaking above 8.5% on May 8-9, reaching a level not seen since November 2022 when the concerns regarding the economic outlook deteriorated significantly in the wake of the war in Ukraine and high energy prices.

iulian@romania-insider.com

(Photo source: Alexandru Marinescu/Dreasmtime.com)