Romania’s Borrowing Costs Fall to Nine-Month Low at Bills Sale

Romania’s T-bill yields plunged to the lowest level since June after the central bank extended its policy of unrestricted currency supply at a repo auction for a second week, spurring demand from commercial banks.

The Finance Ministry raised the planned amount of 500 million lei ($149 million) at the sale of 2014 bills today, according to central bank data published on Bloomberg. The average yield fell, beating analyst estimates, and demand almost tripled compared with similar-maturity securities issued last month.

“Limited supply of government debt instruments and lower money market rates support a marginal downside move in yields” that was probably helped by demand from local banks, Raiffeisen Bank Romania SA analysts including Bucharest-based Nicolae Covrig wrote in a note today.

The Banca Nationala a Romaniei scrapped a cap on the size of its repo auction last week and extended its policy of lending to commercial banks without a limit today.

The improved liquidity pushed Romania’s interbank offered rate, or ROBOR, to 5.13 percent on March 8, the lowest level in three weeks. The rate stood at 5.18 percent today, below the central bank’s key interest rate of 5.25 percent.

Romania cut its local debt issuance plan to 3 billion lei this month after raising a record 11.4 billion lei in January. It borrowed 4.03 billion in February, more than the 3.7 billion lei planned.

Yield Falls

The average yield fell to 5.29 percent at the sale today, compared with a rate of 5.57 percent for similar-maturity bills auctioned on Feb. 18, beating estimates of between 5.35 percent and 5.4 percent from analysts at ING Bank Romania SA, Raiffeisen and Piraeus Bank Romania SA. Demand increased to 2.8 billion lei, almost triple from 1 billion lei at the sale last month.

Romania’s central bank lent 7.3 billion lei at the currency sale on March 4, matching bids for the first time in almost five months. It lent 2.3 billion lei at the repo auction today, in line with demand from eight commercial banks.

The inclusion of three local currency bonds in JPMorgan & Chase & Co.’s emerging-market debt index over three months, starting March 1, has spurred demand for the nation’s debt. Some Romanian notes are also eligible for entry to a Barclays Plc (BARC) emerging-market index from the end of this month.

The leu weakened 0.4 percent to 4.3728 per euro by 3:08 p.m. in Bucharest, falling for the first time in three days and heading for its lowest level on a closing basis since Feb. 26.

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net; Irina Savu in Bucharest at isavu@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; James M. Gomez at jagomez@bloomberg.net

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