Romania’s government borrowing cost hits fresh 4-year high

Romania’s sovereign 10-year bonds yield, a barometer for the cost of financing in the economy, reached a fresh 4-year high of 4.835 percent this week, amid growing concerns regarding the health of public finances.

“On the government securities market, interest rates continued to rise: on the 10-year maturity with a base point at 4,835 prcent (the highest level in the last four years),” Banca Transilvania’s analysts said in a research note.

The yields consolidated close to 4.83 percent, before increasing again on Friday.

Experts say the main drivers behind the rise of bond yields are the concerns about the state of Romania’s public finances, in a global context characterized by a gradual increase in funding costs.

Finance Ministry data showed that Romania’s consolidated budget ran a deficit of RON 4.46 billion – 0.48 percent of gross domestic product (GDP) – at the end of March, compared with a surplus of RON 1.52 billion – 0.18 percent of GDP – in March 2017.

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Total budget revenues rose by 11.5 percent year-on-year in the first quarter of 2018, but were largely outpaced by expenses, which increased by 22.1 percent, raising concerns about the sustainability of public finances.

Romania’s current account deficit also grew by 26 percent in the first quarter of this year, to EUR 967 million.