State borrows again at interests below NBR benchmark rate

The state has again succeeded in borrowing RON from commercial banks at lower interest rates than the national bank's benchmark rate, after a two and a half year hiatus, as investors are regaining their confidence in the Romanian economy. Last week, the state borrowed 1.3bn RON over six months at an average interest rate of 6.73% per annum, below NBR's benchmark rate of 7% per annum. Investors' appetite for Romanian T-bills has been whetted by the still high yields (yields stood at 10% per annum in December last year), but also by the outlook of falling interest rates domestically. Analysts expect the NBR to further cut its benchmark interest rate toward 6.5% per annum, in a bid to spur the economy that is showing the first signs of a rebound after the steepest recession of recent history. "The government's need to raise money will decrease after it borrows from international markets, so that domestic demand will be modest in the following period. This should keep RON yields at current levels, with chances of seeing even additional declines," comments Ionut Dumitru, chief-economist of Raiffeisen Bank.