By Edwig Ban
The Ministry of Public Finances (MFP) contemplates issuing Euro-bonds worth approximately 8 billion euros (equivalent) over 2018-2019, in the context of the implementation of the annual plan for financing budget deficit and refinancing public debt, according to a draft Government Decision published by this Ministry.
Thus, in order to cover for the financing needs on the external markets in 2018 and 2019 and considering the amount available right now, of 930 million euros, the total value of the government bonds issuance framework-programme, 'Medium Term Notes' (MTN Programme) will be supplemented with 7 billion euros, from 20 billion euros up to 27 billion euros.
'As it is now, the Government Decision no. 1264/2010 on the approval of the government bonds issuance framework-programme 'Medium Term Notes' (MTN), with the subsequent modifications, regulates the possibility to issue bonds on the external markets, within a certain limit (at any time) of 20 billion euros or equivalent in any foreign currency. The value of the bonds issued and not paid (in euros and US dollars) under the MTN Programme currently stands at 19.1 billion euros (value calculated based on the BNR exchange rate valid for November 28 2017, as following: 2012- 2.25 billion US dollars and 1.5 billion euros, 2013 - 1.5 billion US dollars and 2 billion euros, in 2012 - 2 billion US dollars and 2.75 billion euros, in 2015 - 2 billion euros, in 2016 - 3.25 billion euros, in 2017 - 2.75 billion euros. Right now, the amount available for Euro-bonds issues under the Programme is worth approximately 0.93 billion euros,' specified the substantiation note attached to the normative act regarding the modification of the Government Decision no. 1264/2010.
According to the Ministry of Finances, the sovereign issuers use MTN programmes, without limiting it to a certain period of time, as the programme was initially launched with a value that could grow in time depending on the financing period, the changes in the financing needs that might intervene and other relevant aspects for the issuer (financing strategy, evolution of the budget deficit etc.). Therefore, in Poland's case the MTN Programme value increased gradually starting with 2017, from 25 billion euros, up to a level of 70 billion euros in 2017.
The government bonds issuance framework-programme is a uncommitted facility, concluded between the Ministry of Public Finances, in its capacity as issuer, and a selected group of financial institutions, where they periodically issue government bonds on the external markets based on a standard contractual documentation.
This year, the Ministry of Finances 'went' two times on the external markets. In April, when the Finances attracted 1.75 billion euros for a issue of Euro-bonds in two tranches. The first was a new issue, worth 1 billion euros, with a 10-year maturity and a 2.375% coupon, and the second one, worth 750 million euros, represented the reopening of an issue launched in October 2015, with an initial maturity of 20 years and a coupon of 3.875%.
Later, in October, the state launched bonds worth one billion euros on the external markets, by reopening the issue from April.
The yield stood at 2.16% in October, with a total demand 2.7 folds higher than the offer. In April, bonds were placed at yields of 2.375%, in case of the new issue, and 3.875%, in the case of the second issue.
Romania benefits from a favourable rating for investments, 'investment grade', from the four financial rating agencies. Thus, Standard & Poor's (S&P) confirmed on Tuesday the ratings for the long-term and short-term debts in foreign currency and local currency at 'BBB minus/A-3', with stable outlook. Moody's gave Romania a Baa3 rating for long-term debt and Fitch Ratings gave a 'BBB minus' rating for long-term debts in foreign and local currencies, while the Japanese agency JCR this year's spring announced a rating of BBB/BBB+ for Romania, for long-term debt in foreign and local currency. All these ratings have stable outlook.