Romania’s 3-month ROBOR hits new high on worries regarding market liquidity

Romania’s three-month money market rate (ROBOR), the main indicator that sets the interest rates for RON currency borrowers, rose on Wednesday for the fourth day in a row up to 3.35 percent, the highest level since August 7.

On Tuesday, 3-month ROBOR was 3.32 percent.

The 6-month ROBOR increased to 3.56 percent, the highest level since March 2014.

Compared with the end of 2017, the 3-month index rose by 1.30 percentage point, from 2.05 percent.

Since October 1, National Bank of Romania did not inject liquidity into the money market through repo operations (government securities-backed lending to banks), a move designed to address liquidity shortage – and to cap interest rates in the market.

This new surge of money market rates is mainly due to worries regarding liquidity.

“The money market implied yields have inched higher again on worries regarding the system’s liquidity for the new reserve period which started today,” ING Bank analysts said on Wednesday, in a research note.

The overnight trades above 4 percent and the longer tenors inched another 8-10 basis points higher, with 1-year now at 4.10 percent.

“That’s quite a bit of decoupling from the central bank’s policy rate. Hence, we expect a liquidity injection next Monday to bring at least the front-end rates below the Lombard, while the longer end will likely remain elevated for longer,” ING Bank estimates.