Ten local banks bought one-year treasury certificates worth arecord 1.42 billion euros yesterday, 1.2 billion euros of which forthemselves, feeding into the Treasury almost three times the amountthe Finance Ministry had suggested.
In exchange for an attractive 4.25% yearly interest for euros,banks submitted bids to buy worth no less than 1.76 billions euros,revealing what a financing potential the banking sector has whenthere is no risk involved. The interest is only 0.75% higher thancharged by the IMF.
The local market is thus proving capable of sustaining the budgetdeficit financing needs based on the amounts banks have placed withNBR, compensating the halt of foreign financing even though at ahigher cost.
The high amounts invested by banks are a consequence of the recentdecision of the central bank in an extraordinary meeting to cut therate of minimal mandatory reserves in currency for the fundingraised by banks from 30% to 25%. According to estimates on themarket, the NBR released exactly 1.4 billion euros, which movedinto the Treasury account to finance the budget deficit thatremained at 5.1% of GDP in October, compared with the annual 7.3%target.
"4.25% is a very good yield. One could not have found one-yearinvestments with a similar yield," a banker admits.
Dealers felt the yield for one-year securities could have gone downtowards 3.75%, a level that would have covered the cost ofattracting resources and a minimum profit margin.
"The price includes a premium of approximately 0.75% above thebenchmark and CDS. As a premium for a local bond, it is a fairprice, which objectively reflects both the interest of the FinanceMinistry and of the banks'," commented Dorin Badea, head ofUniCredit Tiriac Bank's treasury.
The state agreed to pay a higher premium to borrow a sizeableamount.
All thirteen primary dealers (banks that are bound to submit offersto buy for every government securities auction) participated inyesterday's auction, but only ten of them actually boughtsomething: RBS Bank, UniCredit Tiriac, Bancpost, BRD, BancaTransilvania, Alpha Bank, Citibank, ING, BCR and Raiffeisen. Thethree that did not buy are CEC Bank, which does not havesignificant amounts of euros available, MKB Romexterra andCarpatica, two small banks.
The representatives of the Finance Ministry had previously met withthe treasurers of the big banks on Wednesday to discuss thetechnical details of the issue.
"It was a gentlemen's agreement: the state pays 4.25% a year andbanks participate with at least as much as the NBR freed up fromminimum reserves this month," one of the participants told ZF.
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