(Recasts with Romanian auction, previous POLAND-BONDS/)
By Kuba Jaworowski and Luiza Ilie
WARSAW/BUCHAREST, Oct 8 (Reuters) - Investors shunned a
Romanian debt tender on Wednesday, highlighting wariness towards
emerging European assets, but Poland bucked the trend with
demand analysts chalked up to its economy and 2012 euro plans.
Romania sold just 0.5 billion lei worth of its 6-month
treasury bills at an average yield of 12.45 percent. It was half
the volume targetted by the government and well over the 11.14
percent yield garnered of the last tender on Aug. 13.
"In times of crisis, emerging markets bonds and T-bills are
perceived less than a safe haven and more as a risky emerging
markets asset and only bonds of developed economies gain," said
Elisabeth Gruie, a currency strategist at BNP Paribas in London.
The poor showing echoed Slovak and Hungarian debt auctions
this week that also lured fewer investors than usual, and
analysts said coordinated interest rate cuts by the world's
major central bank's would offer little relief.
Poland, however, showed resistance to the risk aversion
sweeping the region, which has largely been the result of
western investors ditching emerging assets to hoard dollars and
euros.
It sold 2.5 billion zlotys in bonds at a primary tender and
an additional 0.5 billion in a top-up auction. During the first
sale investors set the average yield at 5.859 percent.
Analysts and some central bank policymakers also said a
coordinated rate cut on Wednesday by the world's major central
banks had added to the case for Poland holding off on further
rate rises, as inflation eases and growth slows.
And Poland's plans to adopt the euro in 2012 -- which would
cause its interest rates to drop to European Central Bank levels
-- gave market players an impetus, dealers said.
"We... have euro adoption prospects and Poland's
fundamentals seem relatively safe," said Maciej Slomka, head of
fixed income at Pekao bank in Warsaw.
FUNDAMENTALS
Economists expect a growing need for cash in Romania, which
largely depends on foreign borrowing to finance its double-digit
current account deficit, would prompt higher yields in future
tenders, and it will soon no longer be able to reject bids.
The ministry sold 411 million lei in five-year treasury
bonds last week, at an average yield of 10.61 percent, compared
with an average yield of 9.51 percent at a tender on Sept. 4.
"The ministry will pay even more than 13 percent on short
term debt," said Nicolaie Alexandru-Chidesciuc, senior economist
at ING Bank in Bucharest.
"They are clearly in great need of liquidity ... Banks have
picked up on that and they will put upward pressure on yields."
Romania targets a consolidated budget deficit of 2.3 percent
of GDP this year but analysts have said a ramp-up in spending
ahead of a general election on Nov. 30 may put the plan at risk.
Poland, on the other hand, plans to cut its budget deficit
to 2 percent in 2009 from 2.5 percent this year. Its current
budget performance suggests the shortfall may be about a third
lower than initially envisaged by the government.
"Budget execution has been amazing so far in Poland, hence
they don't need to issue as much debt," Gruie said.
(Writing by Kuba Jaworowski; editing by Patrick Graham)
