(Bloomberg) -- Romania is tapping international capital markets for the first time this year, raising new debt at a turbulent moment for domestic politics and global investor sentiment.
Its new euro- and dollar-denominated bonds were on offer on Monday after a jump in yields as the government struggles to rein in election spending that caused the widest budget deficit in the European Union last year.
The offer includes a five-year euro note, with price guidance in the 310 basis-points area over midswaps and a 9-year security at around 405 basis points, according to a person with knowledge of the matter. Romania is also offering 12-year dollar-denominated bonds at up to 310 basis points above Treasuries, said the person, who asked not to be identified.
The sale comes amid Romania’s biggest political crisis since the fall of communism, with the government in Bucharest struggling to hold its ground against a surge of the far right. It has just approved a draft budget for this year, which aims to narrow the deficit by more than one and a half percentage points to 7% of economic output this year.
Romania is also coming to the market at a time when US President Donald Trump’s announcements on trade tariffs are causing wide swings across emerging-market assets.
While Romania hasn’t convinced investors it has solved its fiscal issues, it’s offering more premium than regional peers and may have wanted to come to the market before Trump extends his tariffs to Europe, said Charlie Robertson, the London-based head of macro strategy at FIM Partners.
“I’d reluctantly understand why someone would want to own the bonds given the high yields,” Robertson said. “If they can raise cash in euros cheaper than local markets it may take the pressure off the local market.”
The combined order book for the two euro tranches has exceeded €4.4 billion, the person said. Romania has been planning to remain one of the biggest issuers of foreign debt among its regional peers this year with targeted sales of €13 billion ($13.3 billion), after raising a record €18 billion last year.
The country’s gross funding needs are estimated at 231 billion lei ($48 billion). More than half of that will be covered from the domestic market, including via retail debt.
Cheaper prices and a relatively more constrained supply are providing “a constructive technical backdrop” for Romania’s eurobonds this year, Henry Burdon, an analyst with Tellimer Insights, said in a note.
At the same time, bond performance will depend on the authorities’ ability to convince markets to “buy into their fiscal plans,” Burdon said. “Given the shortcomings of the draft budget, this is unlikely to happen before the implementation of further tax reforms.”
--With assistance from Irina Vilcu, 'Tofe Ayeni and Hannah Benjamin-Cook.
(Updates with guidance and analyst quotes from third paragraph)
