Avoiding a credit rating downgrade by major rating agencies is a national objective, said State Treasury Director General Stefan Nanu, stressing that the sovereign rating serves as a benchmark for all issuers in the market.
'This is a very hot topic these days, and I'm glad it's receiving attention. I believe there is much greater awareness now of the harm that would result from a downgrade to non-investment grade. At the Ministry of Finance (MF), our role was to distribute materials outlining these risks in all directions,' said Nanu at the Profit Capital Market Forum, organised by Profit.ro.
He highlighted that warnings from rating agencies, particularly those regarding negative outlooks, came just in time.
'We recall that Fitch issued such a warning in December, and that prompted a swift political response. A government emergency ordinance was passed, if it hadn't been adopted on the very last day of the year, the consequences would have been disastrous. Downgrading from investment grade to non-investment grade is not a decision agencies take lightly. It's much easier to adjust a rating from, say, AA to A+, than to take a sovereign out of the investment-grade category. That's because many portfolios are heavily exposed to Romania and are dedicated to holding investment-grade assets,' he explained.
Nanu stressed that fund managers can currently buy Romanian bonds because of the investment-grade rating. Maintaining that rating is not only a vital source of funding, but also offers the potential to reduce borrowing costs.
'Practically speaking, if we lose that rating, those portfolios will no longer be able to buy our bonds. Moreover, some investors will initiate exit strategies. While some are more exposed than others, a series of exits will naturally place pressure on our yield curve, which is already relatively high. Although spreads and yields have recently declined in our favor, avoiding a downgrade remains, in my opinion, a national priority. It's not just about sovereign financing costs, all other market issuers benchmark against the sovereign rate,' he added.
The Treasury director emphasised that state-owned companies planning to issue bonds use the sovereign rating as their point of reference.
He also noted that there is ongoing communication with rating agencies, which has recently intensified.
'There has been speculation, claims like they have lost patience' or a downgrade is coming.' That is not how they operate. The agencies will act in a rational, methodical manner, waiting to see the new government and the full fiscal policy package, after which they will make their assessment. They also maintain regular communication with the European Commission,' he said.
Nanu mentioned that Fitch has a scheduled review date of August 15, and their representatives will soon visit Bucharest. Moody's and Standard & Poor's will follow in September and October, respectively.
'That's why it is extremely important that the fiscal package puts us back on the adjustment path agreed with the European Commission, so we receive positive feedback from Brussels,' Nanu concluded.
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