Low chances for bond issue this autumn

Romania’s chances to launch a new bond issue carrying a favourable interest rate are low even though investors’ perception as to economic outlooks is much improved as compared to the end of last year and the first half of the current year.

“We are in close contact with Romanian authorities as to the moment they could launch a new euro or yen-denominated bond issue, but we have not managed yet to reach a conclusion that would lead us to setting a launch date,” Armando Valini, with Nomura International investment bank, told Ziarul Financiar.

He says that at this moment financial markets “are resting” because the July-August period is dead from the point of view of investments in governmental bonds.

Matthew Voegl with Merrill Lynch, which is another investment bank the Government mandated to prepare the launch of a bond issue, also admits that Romania’s loan perspectives have improved, but proved to be quite sceptical with regard to the launch of a bond issue during the following three-four months.

“Generally, such an issue is prepared at least two-three months ahead. And, so far, there is no clear signal from the part of the Government,” says Voegl.

At this moment, quotations of Romanian German mark-denominated bonds range between 92.2 and 93.5% of face value, on the foreign market. Adding the interest, of 7.75% per year, the yield of Romanian bonds traded in German marks amounts to almost 15%, which is very much.

“Since Romania is not yet regarded as a common presence on capital markets, investors’ information and implicitly transactions with Romanian governmental bonds register quite a low level. And this is not good for a country that needs foreign sources to finance its budgetary deficit,” Ron Atkinson, a London Stock Exchange analyst, told Ziarul Financiar.

Atkinson thinks at the same time that Romanian authorities are facing a difficult problem now. “It seems that the noble target of having low interests for bonds financing budgetary deficit will have a boomerang effect over macroeconomic reforms,” he also stated.