Finance Ministry turns to market's good will

Insurance companies, investment funds and well-off individuals are the only ones the Finance Ministry can count on for raising the $300 million in three-year bonds it needs through the new issue scheduled for May 7.
The first auction of foreign currency-denominated bonds held on April 9 turned into an instrument used by the Finance Ministry to show how much interest it is willing to pay to borrow dollars from the domestic market: 4.5% a year. The price paid for this hint: only $55 million out of the projected $200 million were possible to raise for the interest the Ministry had in mind.
This is actually why the initial amount scheduled for the May 7 issue, $200 million, went up to $300 million. The auction is open to both residents and non-residents. The par value of a bond is $10,000, with the interest to be paid on a yearly basis.
Does the Finance Ministry stand chances of raising more cash without having to take too high an interest this time? The investors are still not very convinced this placement is really lucrative. Particularly because the annualised inflation has yet to go below 17% and expectations are not that bullish.
“These bonds would not yield a significant gain for investors, at least at first. I think the bonds would have been more successful if they had been released sometime sooner, when interests were more visibly going down,” said Walter Blaj, executive manager of Globinvest, a company that manages Transilvania and Napoca funds.
On the other hand, the interests on the T-bills in ROL are slightly going up. “It was obvious this would happen in the end considering the too wide gap compared with the 18% offered by the NBR (National Bank of Romania) for one-month deposits,” an analyst says.
The Finance Ministry bets on the fact that the yield of the Romanian eurobonds due in 2005, the most suitable benchmark in terms of maturity, has slightly fallen to 4,97% over the last few days. It would therefore justify maintaining interest in the neighbourhood of 4.5%.