This data is available on the Ministry of Finance’s website. According to the information provided, the main drivers of public debt growth in the first half of the year were the issuance of government securities on the primary market, which provided net financing of 5,021.5 million lei, and the direct placement of government securities to individuals in the amount of 327.75 million lei.
The weighted average interest rate on the securities placed over the six-month period stood at 9.46%. Based on the placement trends, experts conclude that the Ministry of Finance is suppressing government bond yields.
As government bond yields continued to rise, the ministry deemed it necessary to curb the supply of bonds for sale at recent auctions. For three auctions in a row, the recorded volume of government bond sales has been lower than the Ministry of Finance’s offer—93.1% of the offer on June 16, 72.7% on June 30, and 94.9% on July 14, notes economist Vladimir Golovatiuc.
“In total, 1.1 billion lei worth of government securities were not sold. At the same time, oddly enough, banks’ bids to purchase government securities worth more than 0.5 billion lei were not fulfilled,” the expert notes with surprise.
The oddity lies in the fact that, on the one hand, the Ministry of Finance is unable to sell the package of government securities it had planned, while on the other hand, it is itself cutting off part of the demand.
“In reality, it’s quite simple. The Ministry of Finance faces a dilemma—either sell more or curb the rise in yields. And it chooses the latter.
By curtailing part of the demand, the Ministry of Finance isn’t just refusing to sell some government securities; it’s refusing to do so for those securities for which banks are demanding higher yields, thereby curbing even greater growth in those yields.
The month has only just begun, but it appears that the Ministry of Finance will face a repeat of the situation in June, when proceeds from the sale of government securities will be insufficient to repurchase previously sold government securities,” says Vladimir Golovatiuc.
