Romania Taps International Markets for Second Time This Year

  • Country marketing 1 billion euros of 12-year bonds on Thursday
  • Plans to raise 3 billion euros in foreign markets in 2016

Romania is returning to international markets for the second time this year as it ramps up sales of euro-denominated bonds to finance increased spending before general elections.

The Finance Ministry is offering 1 billion euros ($1.1 billion) of 12-year bonds at 225 basis points above mid-swaps, from an initial price target of about 235 basis points, according to a person with knowledge of the offering. Stefan Nanu, head of Treasury at the ministry, confirmed the issue in a phone interview. That follows the sale of 1.25 billion euros of notes due in 2025 and 2035 in February, with 10-year securities priced at a spread of 190 basis points.

“There is definitely appetite for EM euro paper,” said Giuliano Palumbo, a Milan-based money manager at Arca SGR, who decided not to buy the issue after the original offer tightened.

The government is closing in on its 3 billion-euro borrowing target this year before elections set for June and November to replace the first technocratic cabinet since the fall of Communism. The sale also comes as Romania, whose economy is growing at one of the fastest paces in the European Union, and other countries in the region face risks of cutbacks in EU development funds should the U.K. chose to exit the 28-nation block in a referendum next month.

“Romania is a solid credit story and any bond issuance should face strong demand from investors even though the biggest challenge at the moment remains any Brexit and EU-related spillover risks,” said Simon Quijano-Evans, chief emerging-markets strategist at Commerzbank AG in London.

The yield on the Romanian debt due 2025 jumped eight basis points to 2.49 percent, the highest level since February, by 6:45 p.m. in Bucharest, after the sale of new bonds was announced. That’s up from this year’s low of 2.34 percent on April 7 and compares with rates of 1.5 percent and 1.6 percent for 10-year Italian and Spanish bonds, respectively.

The nation’s borrowing costs have risen in the past month after lawmakers approved a controversial mortgage law despite repeated central-bank warnings of an increased threat to the nation’s financial stability. The government is trying to accommodate higher spending on state wages and child care approved by lawmakers. The budget deficit is estimated to reach the EU’s upper limit of 3 percent of economic output.

Citigroup Inc., JPMorgan Chase & Co., Raiffeisen Bank International AG, Societe Generale SA and UniCredit SpA are managing the sale, the person said.

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