* Leu, bonds ease after Romania court austerity ruling
* Puts financing worries back in focus, adds pressure on CEE
* Romanian finmin says no debt repayment problem for now
(Adds fresher quote, prices)
By Sandor Peto and Dagmara Leszkowicz
BUDAPEST/WARSAW, June 25 (Reuters) - A ruling by Romania's
top court against some government austerity measures threw up
new risks to the country's aid programme on Friday, sending the
leu to a 6-1/2 month low and building pressure on emerging
European assets.
The court's rejection of government-backed pension cuts --
part of a savings package aimed at meeting demands by the
International Monetary Fund -- threatened to delay disbursement
of a 2 billion euro loan tranche, raising risks to short-term
financing.
Analysts said pressure would likely stay on the leu until
the IMF money is secured, and investors will demand a larger
premium at debt auctions, which have already been cut or scaled
back since May when the austerity package was first unveiled.
This could hurt fellow aid recipient Hungary, which is
struggling with its own fiscal tightening, while Polish and
Czech assets looked to be more resilient due to their better
fundamentals and growth prospects, analysts said.
The leu <EURRON=> was down 0.9 percent against the euro by
1328 GMT, but trimmed some of its previous sharper losses. The
Hungarian forint <EURHUF=> was flat versus the euro by late
afternoon, cutting losses from earlier in the day.
Other currencies and stocks were off earlier lows, getting a
slight boost from a rebound in U.S. stocks after better economic
indicators.
The Czech crown <EURCZK=> and the Polish zloty <EURPLN=>
rose. Warsaw stocks <> inceased their gains in the
afternoon to be up 0.7 percent on the day.
The court decision added to worries in a region trying to
shake off investor concern that the euro zone's debt struggles
may spread there despite debt loads that are much lower than the
European Union average.
It also cast doubt over the future of Romania's government,
which squeaked through a no-confidence vote this month but still
faces stiff opposition to budget plans, especially from strong
unions.
"Political instability will rise significantly which means
the outlook becomes grim for interest rates, the currency, debt
yields," said Nicolaie Alexandru-Chidesciuc, chief economist at
ING Romania.
Romanian Finance Minister Sebastian Vladescu said after the
ruling that the country can handle paying its debt at the
moment. []
Romanian eurobond yields rose, although five-year credit
default swaps -- the cost of insuring debt against default --
were quoted only a shade wider at 378 basis points.
Analysts say, however, even if the court's decision puts
additional pressure on assets in Romania, default was still not
on the cards and pressure would likely be short-term. Some said
it may need to resort to tax hikes to find savings needed to
meet aid criteria.
"The decision delays the IMF's disbursement, but we think it
should have a short-term impact on the currency," said Dorota
Strauch, FX analyst at Raiffeisen bank.
HUNGARY FX LOAN HOLDERS HIT
The forint's earlier 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.
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 falls on Friday, but were fragile,
traders said.
Unicredit said 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.
"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.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.725 25.79 +0.25% +2.31%
Polish zloty <EURPLN=> 4.112 4.117 +0.12% -0.19%
Hungarian forint <EURHUF=> 283.71 283.79 +0.03% -4.71%
Croatian kuna <EURHRK=> 7.195 7.195 0% +1.59%
Romanian leu <EURRON=> 4.272 4.235 -0.87% -0.81%
Serbian dinar <EURRSD=> 103.97 103.42 -0.53% -7.78%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -20 basis points to 138bps over bmk*
7-yr T-bond CZ7YT=RR -2 basis points to +159bps over bmk*
10-yr T-bond CZ9YT=RR -2 basis points to +155bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +430bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +398bps over bmk*
10-yr T-bond PL10YT=RR -1 basis points to +335bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -2 basis points to +641bps over bmk*
5-yr T-bond HU5YT=RR -6 basis points to +589bps over bmk*
10-yr T-bond HU10YT=RR -2 basis points to +507bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1528 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Sandor Peto and
Dagmara Leszkowicz, editing by Stephen Nisbet)
