Romania Yields Poised for Record Low at 10-Year Bond Auction

Romania is set to pay its lowest yield in an auction of 10-year bonds today as the proposed inclusion of the nation’s debt in two emerging market indexes buoys investor demand.

The Finance Ministry will offer 600 million lei ($183 million) of April 2023 bonds, according to a issuance calendar published on Bloomberg. The average yield at the sale may drop to between 5.6 percent and 5.7 percent, the lowest since the central bank started recording the data in 2005, according to analyst estimates from Erste Group Bank AG, Societe Generale SA and Piraeus Bank Romania SA. That compares with a rate of 6.75 percent on similar maturity debt auctioned on March 1.

Romania has raised 10.3 billion lei of domestic debt this month before today’s issuance, the most since 2005, and 502.5 million euros ($670 million) of three-year euro-denominated local bonds on Jan. 22, according to data compiled by Bloomberg.

The entry of Romania’s local-currency debt to Barclays Plc (BARC) and JPMorgan Chase & Co. (JPM)’s indexes from March 1 has helped lower Romania’s borrowing costs and strengthen its currency by 1.6 percent this month.

Yields on July 2017 bonds, eligible for inclusion in the JPMorgan’s GBI-EM Index Series, slumped to a record 5.4 percent on Jan. 17, compared with a rate of 6.57 percent on similar- maturity notes sold on Dec. 13.

The rate on Romania’s six-month bills -- not eligible for JPMorgan debt gauge -- fell to a 10-month low of 5.53 percent at a sale on Jan. 21. The Finance Ministry sold 300 million lei of treasuries, in line with its target.

The leu weakened 0.2 percent to 4.3725 per euro by 1:42 p.m. in Bucharest, falling for a fifth day.

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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