Two Decades of Municipal Bond Trading at the Bucharest Stock Exchange

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.