Romania’s bonds and stocks rallied after S&P Global Ratings maintained an investment-grade credit score for the sovereign, providing a relief to the country struggling to overcome a political crisis.
The yield on the domestic 10-year notes fell 12 basis points to 7.24%, down about 40 basis points from a week ago, and strong investor demand helped the Finance Ministry raise more funds than planned at a bond auction on Monday. The benchmark equity index in Bucharest jumped 2.9%, the biggest increase among global exchanges tracked by Bloomberg.
S&P affirmed on Friday Romania’s sovereign score at BBB-, the lowest investment level, the latest of the three major credit assessors to have steered clear of cutting the Black Sea nation’s bonds to junk territory this year. S&P kept a negative outlook and warned it could lower the rating if protracted political turmoil hinders fiscal deficit reduction in the next two years.
“The regular rating reviews by the leading agencies are completed for this year, with the focus now on the continuation of the fiscal consolidation in view of the 2027 budget,” said Stephan Imre, an economist at Raiffeisen Bank International. “Immediate downgrade risks have thus been averted, though rating risks remain due to potential unscheduled rating actions in the fourth quarter.”
Romania has been run by a caretaker government since the collapse of a coalition administration over austerity measures in May. The second attempt to install a fully functioning government failed last week, exacerbating a currency selloff and pushing the leu to a record low against the euro.
The currency gained 0.1% to around 5.334 per euro on Monday, settling in a weaker range after the central bank allowed it to depreciate last week under the managed-float foreign-exchange regime.
The Finance Ministry sold 532 million lei ($112 million) of bonds due in 2028, the first sale of government securities since early September in which it successfully met the auction target.
President Nicusor Dan is set to hold more talks with mainstream political parties and plans to nominate a new prime minister as early as Monday in an effort to avoid early elections.
S&P’s decision confirmed that the fiscal consolidation process and the absorption of European Union funds remained on track, while public investments continued to support economic activity, according to interim Finance Minister Alexandru Nazare. He urged political parties to commit to further reduction of the budget deficit and to stabilizing the public debt.
“To avoid losing what we have managed to safeguard, this effort must continue,” Nazare said. “We are not out of the woods yet and we shouldn’t become complacent after managing to keep the rating. Romania has a negative track record when it comes to the budget deficit.”