Romanian Leu Advances After Government Exceeds Debt Sale Plan

The leu strengthened, erasing its losses earlier this week, after the Romanian government exceeded its debt issuance target for the third consecutive month.

The leu posted the best performance among emerging Europe, Middle East and Africa currencies tracked by Bloomberg this year as foreign investors piled into the nation’s local debt. It weakened less than its peers yesterday when riskier assets were sold off on bets the Federal Reserve may slow the pace of its purchases of U.S. mortgage-backed securities and Treasuries. Romania reopened its five-year bond, borrowing 800 million lei ($241.3 million) at a record low yield yesterday.

“Despite the ebbing risk sentiment, the leu held up well and yesterday’s local debt auction received very decent support,” analysts at BRD-Groupe Societe Generale SA, including Roxana Hulea wrote in a note today. “We believe the tender was supported by some interest from foreigners, reflected in the evolution of the leu.”

The leu strengthened 0.1 percent to 4.3815 per euro by 4:55 p.m. in Bucharest, wiping out a 0.1 percent loss in the first four days of this week. The currency has gained 1.5 percent this year.

JPMorgan Chase & Co. and Barclays Plc said some of Romania’s debt is eligible for entry to their emerging-market bond indexes from March.

Romania raised 4.03 billion lei in leu-denominated debt in February, more than the 3.7 billion lei planned, after raising a record 11.4 billion lei last month.

Bond Auction

The Finance Ministry sold bonds yesterday at an average yield of 5.65 percent, the lowest level since at least June 2007. Demand totaled 1.6 billion lei, according to the central bank’s data.

Romania’s October 2015, January 2016 and July 2017 bonds currently meet the criteria for index inclusion as they demonstrate the highest degree of liquidity, according to JPMorgan.

Many participants at the Jan. 29-30 meeting of the U.S.’s Federal Open Market Committee “expressed some concerns about potential costs and risks arising from further asset purchases,” with some noting that added buying “could foster market behavior that could undermine financial stability,” according to the minutes released by the Fed.

Before it's here, it's on the Bloomberg Terminal.