The uncertainty surrounding the new monetary policy the National Bank is to embrace soon, as well as the interests the Finance Ministry would agree to pay in the future have made banks very reluctant to invest their cash this week. All the more so considering everybody was expecting the yields to resume their way up.
Even though the Finance Ministry agreed to pay slightly higher (average) interests for its two government securities issues on Tuesday and the central bank paid the same 18.25% during its cash purging operations on the monetary market yesterday, the actual investments made by banks were rather low.
Although having intended to raise 800bn ROL, the Finance Ministry managed to collect a little more than 200bn ROL, while the central bank was even less lucky. NBR had set out to “purge” 7,200bn ROL from the market but got only 660bn ROL in the end.
“To a certain extent, this was only natural. The banks are waiting to see what monetary policy decisions the central bank will make soon,” Cristian Sporis, Raiffeisen Bank’s treasurer commented.
The National Bank of Romania has scheduled a press conference for today, to present the macroeconomic situation and the new monetary policy, now that the visit of the IMF delegation in Bucharest is over. The weight of the signals sent out by the NBR officials springs from the fact that the IMF representatives demanded the National Bank to take immediate steps at almost all costs to contain the fast-paced lending growth. Most hints show the central bank will most likely use the interest paid to the banks during its cash purging operations on the monetary market as leverage.
“Who would venture large amounts of money now that the 18.25% interest paid by the central bank for the deposits attracted from the interbank monetary market may go up soon? On the other hand, there is not much to say about the primary government securities market, because the market has seen players lending money to the State in the past for longer terms and at lower interests, but they have no intention of making the same mistake again,” Claudiu Cercel, head of the BRD-SocGen’s market operations division comments.
There were quite a number of banks that rushed to buy three-year bonds for 12.9% early this spring. The interests stand every chance of going up.
Moreover, Cercel says “we expect interests to move up a bit by yearend so that any placement made now could be deemed as unprofitable.”
The Finance Ministry on Tuesday tried to raise 800bn ROL and launched two government securities issues in this regard, one of which maturing in three months and the other in twelve months, but its efforts resulted in a flop: only 202bn ROL. This did not necessarily happen because of a lack of interest from banks, as they oversubscribed the initial offer by more than three times, but rather because they would not take just any interest. oana.nuta@zf.ro