The state has again succeeded in borrowing RON from commercialbanks at lower interest rates than the national bank's benchmarkrate, after a two and a half year hiatus, as investors areregaining their confidence in the Romanian economy. Last week, thestate borrowed 1.3bn RON over six months at an average interestrate of 6.73% per annum, below NBR's benchmark rate of 7% perannum. Investors' appetite for Romanian T-bills has been whetted bythe still high yields (yields stood at 10% per annum in Decemberlast year), but also by the outlook of falling interest ratesdomestically. Analysts expect the NBR to further cut its benchmarkinterest rate toward 6.5% per annum, in a bid to spur the economythat is showing the first signs of a rebound after the steepestrecession of recent history. "The government's need to raise moneywill decrease after it borrows from international markets, so thatdomestic demand will be modest in the following period. This shouldkeep RON yields at current levels, with chances of seeing evenadditional declines," comments Ionut Dumitru, chief-economist ofRaiffeisen Bank.
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