* Leu hits lowest since July 5 after finmin sacked
* Other FX rise, investors await U.S. jobs report
* Czech FinMin names lead managers for Eurobond issue
* New minister not expected to alter Romania debt strategy
(Adds fixed income, fresh comment, detail)
By Marius Zaharia
BUCHAREST, Sept 3 (Reuters) - The Romanian leu hit two-month
lows on Friday after Bucharest reshuffled its government and
appointed a little-known official as finance minister,
increasing concerns about near-term political stability.
Gheorghe Ialomitianu, an economist from the ruling centrist
Democrat-Liberal party, is widely expected to push ahead with
policies Romania agreed with the International Monetary Fund
[] [].
But the reshuffle, seen aimed at boosting the government's
image domestically, signalled increasing tensions within the
main ruling party and raised concerns about its ability to
resist a likely no-confidence vote against it later this year.
"The main driving factor behind the weaker leu is the
government's reshuffle," 4Cast analyst Piotr Matys said in a
note.
"We have been bearish on the leu for a while and do not see
reasons to change our view as tension in politics can intensify
and fundamentals are still weak."
By 1030 GMT, the leu <EURRON=> had fallen 0.3 percent on
the day, trading at 4.278 per euro, off a two-month low of 4.288
hit earlier in the session. Capital Economics said the currency
may drop as low as 4.40 per euro by the end of the year.
The cost of insuring Romanian debt rose about 6 basis points
to 385 bps on Friday, according to Markit.
Dealers said banks were also covering provisions for
non-performing loans taken in hard currency.
"When you are provisioning a non-performing loan (in euros),
it creates a short EURRON position, which you have to cover by
buying the pair and the leu drops," another trader said.
OTHER FX UP
Appetite for high-yielders rose slightly after encouraging
U.S. housing data on Thursday, but investors were waiting for
the U.S. jobs report later in the day before taking on more
risk.
The Polish zloty <EURPLN=> and the Hungarian forint
<EURHUF=> were 0.4-0.5 percent stronger, while the Czech crown
<EURCZK=> was up 0.2 percent.
The Czech Finance Ministry named Deutsche Bank <DBKGn.DE>,
Barclays Capital <BARC.L> and Erste Group's <ERST.VI> Czech unit
Ceska Sporitelna to lead a Eurobond issue it said would take
place in the "near future".
The issue will take pressure off local markets by reducing
local debt supply. Czech bond yields were mixed on Friday,
hovering at record lows.
Regional investors remained focused on the state of public
finances, particularly in Hungary.
Analysts are still divided over whether Hungary's new Fidesz
government will seek a new aid safety net from the European
Union and International Monetary Fund after Oct. 3 municipal
elections, or stick with a pledge to finance itself alone.
Economy Minister Gyorgy Matolcsy said on Friday Hungary had
no room to bolster growth with more budget spending, but pointed
to monetary stimulus instead. He also reiterated Budapest did
not intend to sign a new deal with the IMF. []
"We remain of the view that Hungary is headed towards a very
tense negotiation period when it announces its budget plans
mid-October," BNP Paribas said in a note. "We continue to look
for opportunities to build long EURHUF on dips."
Hungarian and Polish bonds were little changed. Romanian
bonds were also virtually flat, with traders expecting the new
finance minister would not alter an existing strategy to cap
yields at debt auctions at 7 percent.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.653 24.707 +0.22% +6.75%
Polish zloty <EURPLN=> 3.949 3.968 +0.48% +3.93%
Hungarian forint <EURHUF=> 283.6 284.85 +0.44% -4.67%
Croatian kuna <EURHRK=> 7.282 7.289 +0.1% +0.37%
Romanian leu <EURRON=> 4.278 4.266 -0.28% -0.95%
Serbian dinar <EURRSD=> 105.72 105.49 -0.22% -9.31%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +9 basis points to 118bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +101bps over bmk*
10-yr T-bond CZ9YT=RR -3 basis points to +96bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +1 basis points to +410bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +394bps over bmk*
10-yr T-bond PL10YT=RR -3 basis points to +320bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +3 basis points to +636bps over bmk*
5-yr T-bond HU5YT=RR +1 basis points to +595bps over bmk*
10-yr T-bond HU10YT=RR -6 basis points to +504bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1130 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Marius Zaharia;
Editing by Patrick Graham and Susan Fenton)
