First two weeks of T-bonds on BSE show disappointing results
The first two weeks of transactions with Romanian state securities (T-bonds) on the Bucharest Stock Exchange (BSE) showed disappointing results for the local private pension funds: only two transactions, each worth RON 1 mln. (EUR 285,000) took place during those first two weeks after T-bonds got listed at the local stock exchange. Although the market expects soaring demand for state securities coming from pension funds, the interbank market still "makes the rules of the game" when it comes to secondary market T-bonds trading.
During the same two weeks, the volume of trading on the Romanian interbank market for T-bonds was over 20 deals per day (more than 100 times more than on the BSE), while the total value of these deals was of over RON 145 mln. (EUR 41,5 mln.) per day, that is 725 times more than the ones that took place on BSE, according to data published by the National Bank of Romania and analyzed by www.privatepensions.ro.
Under these conditions, a first conclusion is that pension funds have quite a lot to wait until they will be able to buy enough state securities from the more transparent (but for now completely un-liquid) stock exchange market - the interbank market still being the leader in trading at this chapter. Nevertheless, this comes to confirm the initial forecasts made by Romanian officials at the listing of these instruments at the local stock exchange - that liquidity of state bonds on the BSE will stay low for a pretty long period of time.
As a positive note, finance minister Varujan VOSGANIAN then forecasted that the volume of trading state bonds on the BSE will reach 20% of the total in the short to medium term, while the interbank market will still hold 80% of all transactions with state securities on the interbank market. Thus far, the reality falls short of these optimistic expectations, and local pension funds seem to keep a closer eye on the primary market - new issues of state securities, whose yields have dramatically increased during the last year, from 6%-7% to 10%-11% or even higher today.
The Romanian Finance Ministry decided to list a total of 25 issues of state bonds (with maturities higher than 12M) on the Bucharest Stock Exchange market, with a cumulated face value of over RON 8 bln. (EUR 2.25 bln.) to provide a more transparent and accessible platform of trading for institutional investors, mainly local pension funds. Up until now, local mandatory pension funds (2nd pillar) have collected contributions worth 80 EUR mln. in the first three months, the expected volume of collected contributions being at around EUR 25 bln. until the year 2020. Then, the assets under management of mandatory pension funds in Romania could surpass EUR 30 bln., according to research by portal privatepensions.ro.
