Romania is said to have raised $1.5 billion in its first sale of dollar bonds in a year, offering yields below Hungary’s notes as it seeks to fund its budget deficit and refinance maturing debt at lower costs.
The country is issuing 10-year dollar debt at a yield of 4.5 percent, according to a person with knowledge of the offering, who asked not to be identified because the information isn’t public. That compares with 5.4 percent on 10-year notes issued this week by Hungary, data compiled by Bloomberg show. Hungary is rated one level lower by Moody’s Investors Service, Standard & Poor’s and Fitch Ratings.
Today’s sale covers more than half of the 2.5 billion euros ($3.3 billion) targeted by Romania for this year’s foreign currency issuance. Yields have tumbled in the past year as tension eased between President Traian Basescu and Prime Minister Victor Ponta and the ballot on Dec. 9 granted Ponta’s government a super-majority in Parliament.
“Coming hot on the heels of Hungary’s dollar bond sale, this shows the extent of the current appetite for higher-yielding European debt,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy Ltd. in London. “Romania is well positioned to take advantage of the ‘hunt for yield’ because of a combination of the anchor of European Union membership, the attractive carry and good cooperation with the International Monetary Fund.”
Romania said yesterday it seeks to sell $500 million to $1.5 billion of dollar bonds with a maturity of at least 10 years, according to a Finance Ministry statement published on the government’s Official Journal website.
The country last sold dollar bonds in February 2012, raising $750 million in debt maturing 2022 at a yield of 6.45 percent. That rate was 4.20 percent today, according to data compiled by Bloomberg.
Given Romania’s full “year Eurobond issuance plan, they have to think about coming back to the market at least one more time this year,” said Viktor Szabo, who helps manage $11 billion at Aberdeen Asset Management in London.
The dollar bonds being sold today is part of the administration’s 7 billion-euro medium-term note program spanning three years. Romania raised a record 2.25 billion euros in Eurobonds and $2.25 billion in dollar bonds last year as part of this plan.
Romania is rated Baa3 by Moody’s and BBB- by Fitch, the lowest investment grade rankings, and BB+ by S&P, one step short of investment grade. Hungary has a ranking of Ba1 from Moody’s, BB+ from Fitch and BB from S&P.
The Finance Ministry mandated Barclays Plc, BNP Paribas SA, Citigroup Inc. and HSBC Holdings Plc to handle the bond sale.