Abstract
Borrowing through sub-sovereign (municipal) bonds is often considered a sustainable method to finance the local governments’ needs.
The present paper adds to this scarce literature a much-needed update regarding two decades of evolution of the municipal bond market segments at Bucharest Stock Exchange (henceforth BVB), showing, despite some advances, the underdeveloped stage of this market, mainly due to the ownership structure of the issued municipal bonds. The analysis presented below confirms the findings of a report for the European Bank for Reconstruction and Development issued in 2020.
Currently, the quasi-absence of municipal bond offerings (the only exception being the bonds issued by Bucharest) represents an important vulnerability for the future of the municipal bond market segment at the Bucharest Stock Exchange, which might be on the brink of closure by 2030 due to the maturity of presently listed bonds. On the other hand, the need for re-financing might bring the local governments’ option to the alternative of issuing bonds, though the central authorities need to update and improve the framework within which sub-sovereign bonds are issued and offered to investors.
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Notes
- 1.
Based on the data provided by Pop and Georgescu (2011), other four LAUs issued series of bonds that were never listed at BVB; the reasons could not be established. These four series of bonds were issued by: (1) the town of Breaza (Prahova county) in 2002; (2) the county of Arad in 2003; (3) the town of Targu Ocna (Bacau county) in 2004; and (4) the municipality of Cluj-Napoca (Cluj county) in 2004. No other details could be found about these issues.
- 2.
A county residence is, usually, the largest municipality in the respective county; it also concentrates the county’s administrative institutions. The difference between other municipalities and towns was initially based on population; currently, the limits are not respected anymore due to the decrease in Romania’s population. Though, no demoting from the rank of municipality was performed since 2011 census, which revealed a diminishing resident population.
- 3.
For this calculation the Eurostat average exchange rate, for the period 2001–2022, for EUR/RON was used.
- 4.
See footnote 3.
- 5.
The trading symbols for these series of bonds are: ALB26, ALB27, FOC26, IAS28A, NAV27, ORS29, TGM27, and TGM27A. For more details see Appendix 2.
- 6.
The symbols for these bonds with no trading are: PRD06, ARA06, CLM05, GRG05, CLJ05, ANI20, BIS29, SLB29, ZAL30, BIH27, and TIM28. For more details, see Appendix 2.
- 7.
The symbols for the bonds traded just 1 day are: PRD03, CLJ03, BIS05, AIU05, SAC07, TIM26B, PMB32, BAC26B, ALB26, ALB27, FOC26, IAS28A, NAV27, ORS29, TGM27, and TGM27A. It must be mentioned that for the first seven symbols, this one day of trading occurred without involving any special transaction(s). The special type of transaction for the last nine symbols is described within the present text.
- 8.
These county residences are: Oradea, Bihor county, Brasov, Brasov county, Buzau, Buzau county, and Resita, Caras-Severin county.
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Appendices
Appendices
16.1.1 Appendix 1: Romania’s Development Regions
Note: The numbers correspond to the following regions: 1 = North-East region; 2 = South-East region; 3 = South-Muntenia region; 4 = South-West Oltenia region; 5 = West region; 6 = North-West region; 7 = Centre region; 8 = Bucharest-Ilfov region. (Source: Carausan 2012)
16.1.2 Appendix 2: Details Regarding the Sub-sovereign Bond Issuers, LAU Status and the Number of Bond Series Listed at BVB
No. | Issuer and county | Development region | LAU status | No. of bond series | Symbols at BVB |
|---|---|---|---|---|---|
1. | Alba-Iulia, Alba | Center | Municipality-county residence | 6 | ALB04; ALB06; ALB25; ALB25A; ALB25B; ALB27 |
2. | Aiud, Alba | Center | Municipality-other | 2 | AIU05; AIU08 |
3. | Sebes, Alba | Center | Municipality-other | 2 | SEB04, SEB07 |
4. | Teius, Alba | Center | Town | 1 | TEU20 |
5. | Alba | Center | County | 1 | 8ALB26 |
6. | Arad, Arad | West | Municipality-county residence | 1 | ARA06 |
7. | Campulung Muscel, Arges | South-Muntenia | Municipality-other | 1 | CLM05 |
8. | Bacau, Bacau | North-East | Municipality-county residence | 5 | BAC05; BAC08; BAC26; BAC26A; BAC26B |
9. | Oradea, Bihor | North-West | Municipality-county residence | 2 | ORD06; ORD10 |
10. | Bihor | North-West | County | 1 | BIH27 |
11. | Bistrita, Bistrita-Nasaud | North-West | Municipality-County residence | 3 | BIS05, BIS08, BIS29 |
12. | Predeal, Brasov | Center | Town | 3 | PRD03, PRD06, PRD26 |
13. | Sacele, Brasov | Center | Municipality-other | 1 | SAC07 |
14. | Baile Herculane, Caras-Severin | West | Town | 1 | BHR20 |
15. | Oravita, Caras-Severin | West | Town | 1 | ORV27 |
16. | Cluj-Napoca, Cluj | North-West | Municipality-county residence | 2 | CLJ03; CLJ05 |
17. | Eforie, Constanta | South-East | Town | 1 | EFO17 |
18. | Mangalia, Constanta | South-East | Municipality-other | 1 | MNG03 |
19. | Medgidia, Constanta | South-East | Municipality-other | 1 | MED09 |
20. | Navodari, Constanta | South-East | Town | 2 | NAV09; NAV27 |
21. | Aninoasa, Dambovita | South-Muntenia | Commune | 1 | ANI20 |
22. | Giurgiu, Giurgiu | South-Muntenia | Municipality-county residence | 1 | GRG05 |
23. | Deva, Hunedoara | West | Municipality-county residence | 2 | DEV08; DEV08A |
24. | Orastie, Hunedoara | West | Municipality-other | 1 | ORS29 |
25. | Hunedoara | West | County | 3 | HUE26; HUE26A; HUE26B |
26. | Slobozia, Ialomita | South-Muntenia | Municipality-county residence | 2 | SLB05; SLB29 |
27. | Iasi, Iasi | North-East | Municipality-county residence | 2 | IAS28, IAS28A |
28. | Targu Mures, Mures | Centre | Municipality-county residence | 4 | TGM05; TGM06; TGM27; TGM27A |
29. | Zalau, Salaj | North-West | Municipality-county residence | 2 | ZAL04; ZAL30 |
30. | Siret, Suceava | North-East | Town | 1 | SRE28 |
31. | Lugoj, Timis | West | Municipality-other | 2 | LGJ05; LGJ14 |
32. | Timisoara, Timis | West | Municipality-county residence | 7 | TIM05; TIM11; TIM26; TIM26A; TIM26B; TIM26C; TIM26D |
33. | Timis | West | County | 1 | TIM28 |
34. | Horezu, Valcea | South-West Oltenia | Town | 1 | HRZ15 |
35. | Focsani, Vrancea | South-East | Municipality-county residence | 1 | FOC26 |
36. | Bucharest | Bucharest-Ilfov | Romania’s capital | 6 | PMB18; PMB20; PMB22; PMB25; PMB28; PMB32 |
16.1.3 Appendix 3: Comparative Municipal Bond Coupons Versus Inflation Rate, Bank Deposit Interest Rates, Dividend Yields (DIVY), and Treasury-Bond Coupons
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Pop, C., Georgescu, MA. (2024). Two Decades of Municipal Bond Trading at the Bucharest Stock Exchange. In: Negrușa, A.L., Coroş, M.M. (eds) Sustainable Approaches and Business Challenges in Times of Crisis. ICMTBHT 2022. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-031-48288-5_16
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