* CEE currencies, bonds ease after Romanian court ruling
* Romania court says planned pension cuts illegal
* Romanian finmin says no debt repayment problem for now
* Leu falls over 1 pct vs euro, forint sheds half pct
(Adds details, new prices)
By Sandor Peto and Krisztina Than
BUDAPEST, June 25 (Reuters) - Romania's bonds and leu
currency dived on Friday, dragging Central European currencies
lower, after its Constitutional Court rejected parts of a key
austerity package, endangering its IMF aid. []
The leu <EURRON=> sank 1.1 percent against the euro by 0957
GMT. The forint <EURHUF=> of Hungary, which is also tightening
budget policy sharply to meet agreements with international
lenders, shed half a percent to 285.30.
"Obviously the (Romanian) news is highly concerning and
there is a real danger that this could impact the IMF deal
negatively if the government does not come up with alternative
measures so the market reaction is totally justified," said Lars
Christensen, analyst at Danske Bank in Copenhagen.
The disbursement of a 2 billion euro tranche of an IMF/EU
loan hinges on the court's decision and the ruling aggravates
financing risks for Romania, which is already struggling to sell
debt.
Romanian Finance Minister Sebastian Vladescu said after the
ruling that the country can handle paying its debt at the
moment. []
Romanian sovereign Eurobonds fell sharply, although
five-year credit default swaps -- the cost of insuring debt
against default -- were quoted only a shade wider at 368 basis
points. []
The concerns over Romania came at a time when worries over
the euro zone's own debt crisis is keeping market sentiment
fragile.
"Some investors may need to close positions in Greece, and
some of the same hedge funds may also work here and withdraw
money," one Budapest-based dealer said.
HUNGARY FX LOAN HOLDERS HIT
The forint's fall against the euro further widened its
losses against the Swiss franc, pushing it to a 15-month low of
211.57 <CHFHUF=> and fuelling concerns over the sizeable amount
of Swiss franc loans held by Hungarian households.
The region was trading on a weaker note anyway as the euro
and peripheral euro zone borrowers remained under pressure,
increasing risk aversion generally, while concerns over budgets
weighed on Hungarian and Romanian debt auctions.
Hungary cut the value of its 12-month Treasury bill auction
on Thursday due to low demand, and yields at the sale rose.
After weeks of rising yields, Hungarian government bonds
shrugged off the forint's fall on Friday, but were fragile,
traders said.
Unicredit said in a note that while the weak bill auction in
Hungary was negative news but not a particular reason for
concern, the Swiss franc's firming was a factor to watch
closely.
"(The bill auction was) not dramatic but the second time in
a row this has sent a clear negative reaction to investors,"
Unicredit said.
"However, we are not overly worried about the potential
demand for t-bills as the banking sector is still over-liquid.
On the other hand we are particularly worried about the current
CHF/HUF level which... was only 2 percent below last year's
all-time highs," it said.
A sharply higher franc could make it hard for Hungarian
borrowers to meet loan repayments.
Elsewhere in the region, the zloty <EURPLN=> shed 0.4
percent against the euro, while Polish government bond yields
rose a few basis points.
"Sentiment has been weak for some time; information from
Romania just prompted investors to sell Polish papers," said
Krzysztof Izdebski, a dealer at PKO BP in Warsaw.
But Poland's main equity index, the <> rose slightly,
bucking the general European trend of equity falls. Romania's
<> share index fell by over 5 percent.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.841 25.79 -0.2% +1.85%
Polish zloty <EURPLN=> 4.132 4.117 -0.36% -0.68%
Hungarian forint <EURHUF=> 285.3 283.79 -0.53% -5.24%
Croatian kuna <EURHRK=> 7.195 7.195 0% +1.59%
Romanian leu <EURRON=> 4.281 4.235 -1.07% -1.02%
Serbian dinar <EURRSD=> 103.91 103.42 -0.47% -7.73%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -13 basis points to 133bps over bmk*
7-yr T-bond CZ7YT=RR +2 basis points to +163bps over bmk*
10-yr T-bond CZ9YT=RR -2 basis points to +144bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +5 basis points to +498bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +339bps over bmk*
10-yr T-bond PL10YT=RR +1 basis points to +331bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +644bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +595bps over bmk*
10-yr T-bond HU10YT=RR +1 basis points to +509bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1157 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Krisztina Than; editing by Stephen Nisbet)
