Romania sells EUR 2.75 bln of FX bonds in second issue this year
<p>Romania issued EUR 2.75 billion of euro-denominated FX bonds with 7-year and 14-year maturities, according to <a href="https://www.zf.ro/eveniment/tanczos-barna-ministrul-finantelor-rasufla-usurat-dupa-perioada-22755279?mc_cid=873b0eb479&amp;mc_eid=cd1f92f96c" rel="noopener" target="_blank">Ziarul Financiar.</a> That takes Romania's Eurobond funding this year to EUR 6.75 billion (2% of GDP) after the country sold the equivalent of EUR 4 billion of euro- and dollar-denominated bonds in February.</p>

<p>Finance minister Tanczos Barna concluded on a positive note that the investors' confidence has been restored recently after plunging during the first two months of the year amid political turmoil. He said that the borrowing cost has diminished, indicating "interest rates" of 0.2-0.3 percentage points (pp) lower compared to January: 5.91% for the 7-year maturity and 6.83% for the 14-year maturity.&nbsp;</p>

<p>However, according to our calculations, Romania has paid 355 basis points (bp) over mid-swap for the 7-year issue compared to the 370bp proposed initially – but in line with the spreads paid in early February. There are no grounds to expect stronger investment sentiment until after and largely depending on the May presidential elections. Investors will also closely monitor the budget execution, which was not bright in January-February.</p>

<p>The 7-year issue raised EUR 2.25 billion at a lower cost compared to initial guidance, but the investors' higher expectations for the 14-year maturity resulted in a thinner EUR 500 million issue.</p>

<p>Romania printed a EUR 2.25 billion 5.875% July 2032 bond and a EUR 500 million 6.75% July 2039, according to Global Capital.</p>

<p>The offer price was set at 99.702% of the nominal value for the 7-year bond and 99.614% for the 14-year bond, according to Investing.com. Stabilization efforts, which are actions taken by underwriters to support the price of a security after its initial offering, were not deemed necessary by the stabilization managers.</p>

<p>Based on existing data, the yield at issue was 6.19% for the 7-year maturity and 7.16% for the 14-year maturity.</p>

<p>The investors have apparently accepted lower yields for the 7-year maturity, compared to the 370 basis points (bp) above mid-swap (2.547%) proposed by Romania (under guidance pricing), but the country had to improve its offer compared to the 430 bp above mid-swap (2.764%) initially proposed, in order to raise EUR 500 million, according to our calculations.</p>

<p><em>iulian@romania-insider.com</em></p>

<p><em>(Photo source: <a href="https://www.dreamstime.com/">Alekleks/Dreamstime.com</a>)</em></p>