Romania’s 2018 Euro Bonds Extend Longest Rally in Six Months

Romania’s euro-denominated bond due 2018 gained for a 10th day, the longest rally since March, as higher yields relative to other government securities in the region make the country’s debt more attractive.

Yields on euro-denominated bonds due in 2018 fell 23 basis points to 4.096 percent, the lowest on record, bringing the slide this week to 55 basis points. The yield is still higher than Poland’s 1.899 percent for Poland’s 2018 euro-denominated debt and 3.342 percent for Turkish notes due in 2019.

Political turmoil has eased after the country’s Constitutional Court invalidated an impeachment vote on President Traian Basescu due to low vote turnout in August. The cost of insuring against a Romanian default for five years using credit-default swaps fell 45 basis points to 236, the lowest in more than a year, according to data compiled by Bloomberg.

“Romania has benefited from strong demand for central and eastern European credit,” Andreas Kolbe, a London-based strategist at Barclays Plc, said in an e-mail. “Risks in Romania have become a bit less intense recently. We expect the positive momentum to continue for now.”

The leu gained less than 0.1 percent to 4.5700 per euro by 5:10 p.m. in Bucharest, strengthening for a third day.

Romania may exceed its 2.5 billion-euro ($3.2 billion) international borrowing plan this year, Deputy Finance Minister Enache Jiru said on Oct. 8. It raised 750 million euros from a sale of 2018 Eurobonds at a yield of 5.1 percent on Sept. 4. It has also borrowed $2.25 billion via dollar-denominated bonds this year.

“Strong inflows into emerging-market credit funds amid ample global liquidity conditions have further fueled the hunt for yield in global emerging market credit,” Kolbe said.

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