Romania’s dollar deal last week showed that the bond market will reward issuers that listen and act upon investor concerns – just as it punishes those who do not.
Romania sold $4bn of bonds and paid no more than 5bp of new issue premium for each $2bn tranche. The market is a strong one and many issuers are printing with minimal concession to investors – but they were not issuing bonds as large as Romania’s, and they are not issuers that have come under fire from investors for the amount they issue.
Romania printed close to $10bn last year. Since 2020, when it raised $13bn, it has never failed to issue less than $8bn a year — in contrast to before 2020, when annual issuance was in the single figures of billions of dollars.
Romania has made efforts to reduce its reliance on the conventional bond market. In 2023 it began to diversify away from the public market, taking nearly $1bn via private placements. Romania also plans a green bond debut this year which could come in dollars, euros or yen. A green bond in particular would mean diversifying into a new investor base altogether.
This diversification has paid off, as has better communication from the issuer about when it will issue. A banker on the country's recent dollar trade said the work Romania has done to diversify has made its debt “much more digestible”.
Tapping new sources of funding takes time, effort and money. Accessing new currencies, like yen, can take years. Green bonds require a lot of work in identifying eligible expenditure and coordinating government departments.
The dollar deal this month showed diversification can have tangible results, however, justifying the outlay.
And those benefits are not just limited to better borrowing costs. Doing the work to access new markets means an issuer may be able to access that pool of money at a time when others are closed.
Hungary demonstrated this when it printed a Samuraijust days before Russia invaded Ukraine — the fear of which meant the conventional bond market was closed.
Romania’s effort to diversify has pleased debt buyers and is a lesson to other issuers in managing an escalating borrowing programme.