* Leu edges higher after parlt. rejects no-confidence vote
* Polish May inflation slows more than expected, mkt unmoved
* Low demand could hurt Hungary's Thursday bond auction
(Recasts with Romanian vote, adds fresh prices, Polish CPI)
By Marton Dunai and Dagmara Leszkowicz
BUDAPEST/WARSAW, June 15 (Reuters) - Romania's leu edged higher after the country's parliament rejected a no-confidence vote against the government on Tuesday over deep spending cuts.
The rejection gave a mandate to carry out key reforms, securing the country's 20 billion euros aid package led by the International Monetary Fund.
"This is favourable news for the leu and for rates, although yields will probably remain quite elevated as uncertainty remains, said Nicolaie Alexandru Chidesciuc, chief economist at ING bank in Bucharest.
"At least they (finance ministry) will start selling (debt)."
The EU's second-poorest member has pledged to reform its mammoth, highly-unionised public sector, but social unrest is casting doubts over its austerity drive and raising the spectre of Greek-style debt woes in the country of 22 million.
The leu <EURRON=> had gained some 0.1 percent to the euro by 1518 GMT. Romania's 5-year CDS were at 361.5 basis points, down some 3 basis points since Tuesday's open.
In Poland, statistics office data showed inflation in May slowed more than expected in May to 2.2 percent year-on-year, but the reading had no impact on the zloty and analysts said it did not change the country's monetary policy outlook.
Most expect the Monetary Policy Council to raise the main rate by 25 basis points to 3.75 percent later in the year.
Elsewhere in the region, trade was very thin and one dealer in Budapest said this increased the chances of a sell-off.
"It looks like everyone is watching the (football) World Cup instead of the market," another Budapest dealer said.
The zloty <EURPLN=> added some 0.3 percent against the euro and the Hungarian forint <EURHUF=> rose 0.1 percent.
The Czech crown <EURCZK=> lost 0.3 percent against the common currency. The crown shrugged off May producer prices, which signalled a continuing recovery. [
]Czech party leaders agreed on Monday to reach a coalition deal by early July and form a government by mid-July to kick off preparations for the 2011 budget. [
]
UNCERTAINTIES SEEN
Hungary's debt markets were preparing for a bond auction on Thursday, the first since local political comments comparing Hungary to Greece rocked international markets a week ago.
The country's bond yields rose some 5 basis points across the curve, while Poland's papers were relatively stable ahead of Wednesday 10-year bonds auction.
Hungary's debt management agency AKK said the country plans to isssue 350 billion forints in bonds in the domestic market in the July-September period. [
]Core markets, where risk appetite is seen waning, provided a negative backdrop for regional assets on Tuesday.
"Yesterday evening's decision by Moody's to downgrade Greece to 'junk' will probably cool European investor optimism," Bank BPH analysts wrote in their morning note to clients.
Several analysts in developed markets said the move had already been priced in.
Germany's ZEW sentiment index weakened in May, and the ZEW Institute said economic recovery in Germany, emerging Europe's most important trading partner, might weaken towards the end of the year. [
] --------------------------MARKET SNAPSHOT-------------------- Currency Latest Previous Local Localclose currency currency
change change
today in 2010 Czech crown <EURCZK=> 25.65 25.576 -0.29% +2.6% Polish zloty <EURPLN=> 4.062 4.075 +0.32% +1.03% Hungarian forint <EURHUF=> 278.8 279.07 +0.1% -3.03% Croatian kuna <EURHRK=> 7.208 7.218 +0.14% +1.4% Romanian leu <EURRON=> 4.223 4.225 +0.05% +0.34% Serbian dinar <EURRSD=> 102.86 103.07 +0.2% -6.79% Yield Spreads Czech treasury bonds <0#CZBMK=> 2-yr T-bond CZ2YT=RR +2 basis points to 148bps over bmk* 7-yr T-bond CZ7YT=RR +2 basis points to +170bps over bmk* 10-yr T-bond CZ9YT=RR -2 basis points to +145bps over bmk* Polish treasury bonds <0#PLBMK=> 2-yr T-bond PL2YT=RR 0 basis points to +409bps over bmk* 5-yr T-bond PL5YT=RR -6 basis points to +370bps over bmk* 10-yr T-bond PL10YT=RR -5 basis points to +306bps over bmk* Hungarian treasury bonds <0#HUBMK=> 3-yr T-bond HU3YT=RR +5 basis points to +626bps over bmk* 5-yr T-bond HU5YT=RR 0 basis points to +577bps over bmk* 10-yr T-bond HU10YT=RR -1 basis points to +483bps over bmk* *Benchmark is German bond equivalent. All data taken from Reuters at 1718 CET. Currency percent change calculated from the daily domestic close at 1600 GMT.
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