Yield of Romania's 10-year bonds down as Govt. drafts ambitious 2025 budget planning
<p>The yields of Romania's long-term (10-year) bonds on the secondary market eased by 41 basis points (bp) w/w to 7.61/7.36 (bid/ask) &nbsp;on January 31, to the lowest levels since January 9.</p>

<p>The government drafting a budget planning in line with the fiscal consolidation plan, without supplementary tax hikes, apparently improved investors' sentiment.&nbsp;</p>

<p>However, the borrowing cost reflected by the yields of the 10-year bonds is still 42bp above the level reached on December 11 after the presidential elections were scrapped (on December 6) and the former ruling coalition managed to form a new majority in Parliament (with the help of the Hungarian party UDMR) after December 1 parliamentary elections. In the meantime, however, both <a href="https://www.romania-insider.com/fitch-cuts-romania-outlook-negative-december-2024" rel="noopener" target="_blank">Fitch</a> and <a href="https://www.romania-insider.com/sp-revises-romania-rating-negative-january-2025" rel="noopener" target="_blank">S&amp;P</a> changed their outlook on Romania's fragile sovereign rating to negative, quoting uncertain fiscal dynamics amid political turmoil.</p>

<p>Although the ruling coalition formed by the Social Democrats (PSD) and Liberals (PNL) managed to regain majority in Parliament despite lower scores in the December 1 ballot, the political risks remain elevated in the light of the presidential elections rescheduled for May.</p>

<p>Romania envisages a new FX bond, initially scheduled for the end of January, but deferred to let the positive impact of the budget planning draft prepare the ground.&nbsp;</p>

<p>In related news, an IMF mission will conduct a regular staff visit in Bucharest from February 3-7.&nbsp;Although regular, the visit may provide valuable insights into how realistic the government's budget planning seems.&nbsp;</p>

<p>The <a href="https://www.romania-insider.com/fiscal-council-public-deficit-romania-forecast-2025" rel="noopener" target="_blank">Fiscal Council issued a forecast </a>over the weekend, putting the actual budget gap 0.7 percentage points (pp) above the government's 7%-of-GDP target.&nbsp;</p>

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

<p><em>(Photo source: <a href="https://www.dreamstime.com" rel="noopener" target="_blank">Iryna Drozd/Dreamstime.com</a>)</em></p>