Romanian assets stable

Romanian assets were steady on Friday after ratings agency Standard & Poor's put the country back at investment grade in a long-awaited move, recognising its improvement in cutting external debt. S&P, which raised its credit rating on Romania to 'BBB-/A3' from 'BB+/B', was the last of the three main agencies to upgrade the country. As its decision had largely been priced in, the market impact was limited.
"Markets have recognised much earlier the solid rebalancing of the Romanian economy and, therefore, the decision is to a large extent already priced in," Romania's top lender BCR said in a research note. "However ... relative valuations suggest that there is still some downside potential for the yields of Romanian sovereigns. Elsewhere, Polish bonds retreated slightly as investors took a breather after Thursday's market rally triggered by better-than-expected first-quarter economic growth data across central Europe.
"Investor activity decreased today, most of them are taking profits after the recent rally," a senior fixed income trader at Raiffeisen Polbank said. "But I think it is only a temporary correction, in the mid-term Polish bonds are still attractive." Romanian bonds could benefit from S&P's ratings upgrade, Unicredit said in a note."Long-term ROMGBs could receive limited support from the upgrade (especially the April 2023 and July 2027 bonds)," the bank said.
Romania's five-year yield was unchanged from Thursday's close at 4.07 percent. But yields fell sharply after a debt tender on Thursday, as the entire central eastern European region was buoyed by the encouraging first-quarter growth figures. The yield on Slovenia's 10-year benchmark bond rose to 3.567 percent on Friday from 3.417 percent a day before amid uncertainty on when an early election would be held following the resignation of Prime Minister Alenka Bratusek last week.
The parliamentary parties are expected to decide in the coming weeks on whether to hold the election in July or September. At 1100 GMT, the region's currencies were broadly steady while stock markets traded lower. Hungarian bank OTP Bank bucked the trend, as its shares were up 0.6 percent at 4,378 forints at 1100 GMT, after the bank reported a profit of 5.86 billion forints ($26.34 million) for the first quarter, compared with analyst expectations for a loss.