Three-year bonds, casualties of the yields war

The Finance Ministry’s third attempt at placing ROL-denominated bonds due in three years has failed again on Thursday.
The demand of the banks was over three times higher than the supply, set at 400bn ROL, but the yields they offered, 12.8% -14% a year, made the Ministry reject all the bids submitted. In other words, the Finance Ministry clung on to the 12.5% yield it got for the first three-year bond issue. It remains to be seen for how long it can afford to do so, considering it accepted higher yields for six-month and one-year maturities on Tuesday.
Although the launch of this new instrument last month was based on the market’s need for longer maturities intended to bring predictability, the three-year bonds actually fell victims to the yield game.
“This is a game where everybody must win,” Enache Jiru, state secretary with the Finance Ministry said.
The first three-year ROL-denominated bond issue, the only one that has turned out to be successful until now, got a rather low interest, 12.5%.
“The 12.5% says nothing about how sustainable this maturity is.  One must not jump to conclusions, one needs more issues first,” Jiru was saying after the first issue was released. The developments that followed come to verify this position.
The Finance Ministry got the 12.5% yield, when the National Bank of Romania (NBR) had cut interests on deposits attracted from banks to a minimum of 15.5%. The second three-year issue failed, given that the yields on the monetary market had gone up to 30%.
razvan.voican@zf.ro