CDS measures the perception of international financial markets about the risk of financing Romania.
Romania’s five-year CDS fluctuated at around 110 basis points at the end of last year, dropped to 105 points in January and to about 102 in February and March. Romania is seen as less risky than Hungary (117 basis points), but riskier than Poland (72) and Czech Republic (41).
The CDS makes an impact on the cost of foreign funding and if lower, the government can borrow at lower costs, while local banks can get cheaper lines of credit from their parent banks.
CDS reflect the trend of investor perception of an issuer and during the crisis was one of the most visible indicators of country’s capability to secure financing from capital markets. At the onset of the global financial crisis, in 2008 and 2009, Romania’s CDS was a high as more than 700 basis points.
Romania might borrow EUR2.5 billion to EUR3 billion from international markets in 2017, according to the authorities’ plans but the actual volume of government paper issues abroad and the exact timing thereof will take into account the associated costs and the trend of the local market.
(English version by Loredana Fratila-Cristescu)