Romania’s 3M ROBOR surges to almost 2-month high on large quarterly payments to the state budget and pressure on RON

Romania’s three-month money market rate (ROBOR), the main indicator that sets the interest rates for RON currency borrowers, rose on Friday to 3.11 percent, the highest level since December 3, 2018, on large quarterly payments to the state budget and pressure on RON.

On Wednesday, 3-month ROBOR was 3.03 percent.

The 6-month ROBOR increased to 3.34 percent, the highest level since December 18.

Compared with the end of 2018, the 3-month index rose by 0.09 percentage point, from 3.02 percent. The 3-month ROBOR index reached a record low of 0.68 percent in September 2016.

Since the end of November, the National Bank of Romania has stopped injecting liquidity into the money market through a repo operation (government securities-backed lending to banks), a move designed to address liquidity shortage – and to cap interest rates in the market.

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But during the last couple of weeks, BNR has sterilized the excess liquidity in the market through deposit tenders aiming to defend the Romanian currency.

The rise of money market rates is mainly due to liquidity issues and pressure on RON.

“The O/N implied yield spiked by almost 5 percentage points to above 7.00 percent on the back on large quarterly payments to the state budget, pushing the entire front-end of the money market curve higher and leading to an inversion. Upside pressure in EUR/RON is likely to support good paying interest in the front-end forwards,” ING Bank analysts say in a research note released on Friday.

The Romanian government has recently introduced a tax on bank assets of 0.3 percent from January 1st, 2019, calculated at the current ROBOR 3M-6M level.

The Romanian currency falls deeper on the forex markets on Friday as investors begin to be more skeptical about the local outlook and due to the fast deterioration of the trade and current account balance.

On Friday morning, the RON was trading at 4.7680/EUR but in the previous day, when the Romanian market was closed due to a local holiday, the RON fell to 4.78/EUR.

Analysts say RON’s depreciation is based on weaker outlook regarding Romania.