Romanian eurobonds price going down

The latest Romanian issue of eurobonds, launched early in July and maturing in 2010, has registered a constant price drop during the two months of trading on the international market. This year, Romania has managed to borrow from the foreign capital market at a record interest rate of 5.75%. The investors growing unsatisfied with the market of bonds issued by emerging countries in the context where the US economy has started to turn around and US companies’ shares are increasingly attractive could lead to fewer opportunities of getting a smaller price next year. This happens in spite of the possibility of new improvements in country ratings, especially as for more than one year the evolution of prices has been better than the one suggested by ratings. “Spreads registered by the bonds issued by emerging countries above the market’s benchmark levels have already reached values that are close to record lows, which means that chances of them continuing to fall are dim and that an upward trend is more likely to come about,” says Radu Craciun, senior analyst with ABN Amro Bank. As the pace of the US economy growth speeds up, more and more investors are beginning to switch from high-yield bonds (such as bonds issued by emerging countries, including Romania) to placements in equity, which are becoming more attractive, even though they involve a higher risk. “Under the circumstances, Romanian bonds could also be hit and their prices might go down,” Craciun added. ZF