Weekly Financial - September 10th
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13 Septembrie 2010 |
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BANCA COMERCIALĂ ROMÂNĂ S.A. |
Adresa
Bulevardul Regina Elisabeta, Nr. 5
Bucureşti, Sector 3
Telefon
+40-21-314.91.90
+40-21-312.61.85
Fax
+40-21-310.02.46
+40-21-311.18.19
Website
www.bcr.ro
News
President Basescu urges government on investments
President Basescu stressed that the government should find solutions to sustain EUR 1.5bn in investments in 2011, considering that the total budget deficit for next year is set at EUR 5.7bn, or 4.4% of GDP. Basescu said that the main obstacle to Romania's development is the huge deficit of the Public Pension Fund. Speaking about road infrastructure, he mentioned that the big issue Romania should overcome is to find the money for expropriations before a specific project is launched. He added that this money does not come from the EU, but from the state budget. He warned that if the process is further delayed and Romania does not absorb at least EUR 1.5-2bn next year, the EU is likely to trim the amounts earmarked for Romanian infrastructure.
Earlier this week, Basescu met Jeffrey Franks, the head of the IMF mission in Romania. The president said that the Romanian authorities should consider the negotiation of another agreement with the IMF during the next review of the current 24-month stand-by arrangement in October. A precautionary stand-by arrangement could be an alternative, which means that Romania could choose not to draw the approved amounts, but retain the option to do so if conditions deteriorate. The structural reforms of the public sector and improved absorption of European funds could be the top priorities of another agreement with the Fund. The determination of the officials to continue the fiscal consolidation program agreed with the IMF, as well as the continuation of the relationship with the IMF after 2011, is good news for the capital markets and could create the conditions for the local currency to appreciate and restore investors' confidence.
The leu hit a two-month low of 4.29 this week, as both residents and non-residents became increasingly nervous about the reshuffle of the government. However, investors are slow to regain their composure and are still worried that the Boc cabinet is fragile. However, after the rejection by the Parliament of the no-confidence vote on agriculture filed by the social democrats, the leu firmed slightly towards 4.28. The trend held and the positive news on inflation released today may have led the RON to firm further.
Investors turned sour on 6M maturities
The MoF sold far less than planned in 6-month government debt papers on Monday, with investors even becoming reluctant regarding this maturity, which has so far been the only one to match market expectations in terms of the yields paid. The MoF sold RON 279mn, whereas the planned amount was RON 1bn. The government reshuffle and higher inflation expectations may have prompted this reaction. The MoF has shown a gritty determination in limiting yields to 7% across all maturities and asked investors to distinguish between yields on the primary market and those on the secondary market, where volumes are low. The IMF and EU will disburse this month the sixth and third tranches, respectively, which combined stand at EUR 2.1bn. However, this is pretty unlikely to change investors' views on yields on the local market. On the other hand, if the central bank does not drain some of the liquidity in the market, amid sluggish lending, then banks might come around to the yields. 6M maturities and possibly longer ones could become more attractive, even at 7%. At the same time, the MoF could continue to tap the monetary market to fill the liquidity gap through short-term deposits and even another euro-denominated loan, while October could be the first month for the MoF to issue euro medium terms notes (EMTN).
Real economy
