The National Bank of Romania (BNR) stepped into the secondary market and bought government securities to address liquidity issues in the market, central bank spokesman Dan Suciu confirmed, quoted by Economica.net, which estimates net purchase in the amount of nearly RON 1 bln (EUR 200 mln).

Separately, the banks' dealers say that this supports their assumptions, as the exchange rate is visibly supported by the central bank through draining liquidity from the market. The excess liquidity of around RON 1.8 bln at the end of January turned into a deficit now.

As part of the same strategy, the central bank started buying government securities on the secondary market, all the more so as several bond issues of the Ministry of Finance failed.

But the central bank's capacity of intervention in both cases to manage the exchange rate and address public debt investors' risk aversion is limited, and eventually, both markets will converge to patterns in line with fundamentals - meaning nominal currency weakening and higher cost of public debt. 

andrei@romania-insider.com

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