The increase in the country risk reflects the deterioration of market perceptions on the entire region, with similar deteriorations recorded in Poland and Hungary.
CDS levels of more than 500 basis points were previously recorded some time around June 2010 and 2009, when all-time highs of over 750 points were reached.
BCR analysts believe Romania has largely settled down from a macroeconomic point of view, but economic recovery has so far proven extremely tentative and imbalanced, and macroeconomic fundamentals pale anyway when investor fear prevails.
This would also explain this increase in the cost of risk. In addition to the unstable economic context, analysts also talk about doubts over next year’s tax policy, given that next year is an election year. So far, the Finance Ministry has not given any clues as to the parameters involved in the construction of the 2012 budget, although it is supposed to take it to Parliament soon.
The Finance Ministry is, however, preparing to launch a dollar-denominated bond issue on the US market, but the very significant CDS growth could prompt it to delay its plans.
In addition, the government has started to face funding challenges on the domestic market, as well, where on Thursday it raised only 100 million lei (EUR23.2 million) through ten-year bonds with an average yield of 7.65% – a quarter of the intended amount, as a result of the policy of blocking the increase of yields. (EUR1=RON4.3072)
(English version by Daniela Stoican)