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Romanian Treasury postpones 12-month debt issue amid rising short-term interest rates

February 4, 2014

Romania's Treasury has re-scheduled for February 20 the 12-month issue initially scheduled for February 3 , the central bank said. The move came amid rampant rise in the cost of short-term financing on the money market. It was the effect of the central bank supporting the national currency on the forex market, sources quoted by Ziarul Financiar daily speculated. This questions the expected interest rate cut anticipated by bank experts for the Feb 4 meeting of the central bank's monetary board. The central bank's concern for the exchange rate is visibly driven rather by the credit quality considerations than by price stability worries since roughly two thirds of the non-government credit is denominated in foreign currency and the NPL ratio is already above 20%. The monetary authority has reportedly poured over EUR 1bn on the forex market in just three days, sources estimate. As a result, the local currency strengthened below the level of RON 4.5 versus the euro after having slipped above the benchmark 4.5 level and breached the 4.55 level several times during last month's trading. The money market quotation for 12-month funds increased by more than 50bps in just two days to above 2.5/3.25 on Friday, January 31 , from below 2/2.75 until Wednesday, January 29 . The elevated rates remained at same high levels on Monday, February 3 . The rise was steeper for funds with maturity up to one week where the quotations soared over 270bps to hit 3.7/4.2 from below 1/1.5% until January 29 .

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Source: IntelliNews - Weekly Reports

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