The Ministry of Finance offered up to 10.75% returns for state securities on six months
The Ministry of Finance offered today an average return of 10.61% for state securities with a six month maturity, this being the highest return offered in the past year and a half, since the state became active again on the primary state securities market. The maximum return accepted by the Ministry of Finance was 10.75%. At the last issuance of state securities with a six month maturity, the average accepted return was 9.42%. Today’s trading is the last one before starting the collection for the mandatory pension funds (20th of May) - starting with the next trading session, the pension funds will be constant buyers of these financial instruments.
In today’s trading session, the Ministry of Finance awarded only a little more than half of the amount intended for the issuance, namely RON 270 million of the total RON 500 million, as announced. The rest of the offers were considered non-competitive, as the banks asked for returns higher than 10.75% for the underwriting of the other half. In other words, the market’s expectations focus on returns higher than 10.6%-10.7% per year.
On the 22nd of May, the mandatory private pension funds will be able to buy on the primary market of state securities. According to the estimations of www.privatepensions.ro, approximately two thirds of the mandatory pension funds’ portfolio shall represent state securities. On the 22nd of May, the Ministry of Finance shall organize a trading session for the state securities with a five year maturity. In the last session trading five year maturity state securities, the average return was 8.97%.
However, given the market’s high expectations regarding the returns requested for the securities with different maturities, as well as the trend of almost continuously increasing the returns in the issuances over the past 8-10 months, we can estimate that the mandatory pension funds shall buy their first state securities on the primary market at returns of 9% or even higher, 10%.
The return curve on the primary market of state securities (built based on the average return offered at the most recent trading session for each maturity, was completely reversed today - the returns for short maturities are visibly higher than for long maturities. What remains to be seen are the returns that mandatory pension funds will manage to get for their first investments on the market.
