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Romania sees chance of another Eurobond issue in Sept-Nov
June 3, 2016 / 5:20 PM / a year ago

Romania sees chance of another Eurobond issue in Sept-Nov

BUCHAREST (Reuters) - Romania could issue another Eurobond in the third or fourth quarter before an expected national election, the finance ministry’s deputy treasury chief said on Friday.

The European Union member sold 2.25 billion euros ($2.6 bln) worth of 10-, 12- and 20-year Eurobonds in February and May.

It targets foreign issuance of 3 billion euros this year, with the possibility of also tapping available funding lines from the World Bank and the European Investment Bank, but Diana Popescu said another Eurobond was a distinct possibility.

“Sure, there are elections, but as long as there is a government, we believe we could find a window of opportunity to tap foreign markets during September-November. The euro remains our preferred currency.”

The country holds local elections on June 5 and a parliamentary election is expected in late November or early December.

“What is very important is that we are very flexible,” Popescu said.

“We have many options, we can issue a new bond, re-open ... our 12- or 20-year benchmarks, or issue additional debt on the local market and use the buffer,” Popescu said at the Reuters Eastern Europe Investment Summit.

Romania’s funding costs should remain low in the medium term, even if interest rates start to rise, due to fiscal stimulus and economic stimulus by the European Central Bank, she said.

“We have obviously benefited from this low interest rate environment and current conditions grant Romania relatively easy access to domestic and foreign funding,” Popescu said.

“Forward rates indicate both external and domestic interest rates are expected to rise. Still, it is clear that ECB easing and economic stimulus policies will continue to keep rates low for the medium, possibly longer term, so for us it is still a good environment.”

Foreigners’ holdings of domestic leu and euro debt is expected to stay at around 18 percent of all debt, Popescu said, adding that no large spike was foreseen this year, although there are external risks stemming from the diverging monetary policies of the world’s largest central banks and Britain’s vote on whether to stay in the European Union.

“Their holdings are much smaller than elsewhere in the region, which limits our vulnerability somewhat to external shocks,” Popescu said.

“What we could do to diversify our investor pool is to try to have our long-term bonds included in global fixed income indices, another step in addition to the emerging market debt indices we are already in.”

Romania is rated investment grade Baa3 by Moody’s and BBB- by Fitch Ratings and S&P. Popescu said the finance ministry expects its hard currency buffer to cover four months of funding needs on average throughout 2016.

She said the ministry was not considering foreign debt issues in other currencies such as the Chinese yuan or Japanese yen until debt managers launch a platform that would enable them to use derivative instruments to hedge currency risks. Work on the platform was expected to last up to 18 months.

The Asian market, however, would help diversify the ministry’s pool of investors, she said. Debt managers plan a non-deal roadshow in Asia later this year.

By the end of April, debt managers had covered 38.7 percent of their funding needs of 70-71 billion lei for the year. The ministry faces a 1.5 billion euro debt redemption this month and a 7.5 billion lei ($1.88 billion) redemption in August.

($1 = 3.9841 lei)

($1 = 0.8825 euros)

Editing by Susan Fenton

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