State sells EUR 1.3 billion bonds

On Thursday the Ministry of Finance borrowed EUR 1.3 billion from the domestic market by selling EUR 1.3 billion in government bonds at 4.8 percent average yield.

The Ministry announced last week that its intention was to sell debt worth one million euros at 4.5 percent interest.

The Romanian President, Traian Băsescu, stated for TVR a week ago, that Romania would have to sell bonds worth approximately one billion euros sometimes around November 25th, mentioning that if they were three-year bonds at yields of less than 5 percent, that would mean the country had become creditworthy again.

The President mentioned that Ireland was selling bonds on the market at 9 percent yields, and Greece at more than 8 percent.

"Less than 5 percent means that the market agrees with the state’s measures. I wish this were the moment of truth, because, if we succeed in selling three-year bonds at less than 5 percent now, at the end of the IMF agreement, it would mean that Romania might become creditworthy again", said the chief of state.

The one billion euro bond issuance ‘should be postponed’

The National Bank of Romania governor, Mugur Isărescu, suggested that the ministry of finance should postpone the euro currency government bonds issuance, scheduled for Thursday, because it has the necessary money to repay EUR 1.4 billion in treasury bills maturing on Monday.

"I think the minister will choose to pay off the old loan at maturity because he has the money, and then, after a few days, will issue on normal terms to attract more money", said the governor.

Thus, Isărescu suggested that the ministry of finance could obtain a better price if he organized the auction after having paid the mature debt and there had been no market pressure because the institution would have the money.

So far this year, Romania sold RON 34.8 billion to banks in government bonds.

Translated by Ciocănel Tudor and Raluca Mizdrea
MA Students, MTTLC, Bucharest University