Dec. 18 (Bloomberg) -- Romania’s foreign bonds rallied after President Traian Basescu nominated rival Prime Minister Victor Ponta to form a new government, easing investors’ concern that a standoff between the two politicians might ensue.
Yields on euro-denominated bonds due 2019 fell 19 basis points, or 0.19 percentage point, to 4.06 percent, the lowest since the start of trading on Nov. 5. The leu weakened less than 0.1 percent to 4.4700 per euro by 5:25 p.m. in Bucharest today, retreating from the highest level in almost four months reached on Dec. 14.
Basescu, who has been embroiled in a power struggle with Ponta since June, instructed him to form a new cabinet yesterday. Foreign bond yields have fallen 60 basis points since Ponta’s ruling coalition won a two-thirds majority in parliament in a Dec. 9 election.
“The new cabinet may be formed this week, which may give a boost to Romanian asset prices in the short run,” Szilvia Laszlo, an economist at DZ Bank AG, said in an e-mailed note today.
The political clash culminated with a 52-day suspension for the president, followed by an invalidated nationwide impeachment vote on July 29. Basescu said before returning to office at the end of August that he wouldn’t nominate Ponta as premier for a second time. Lawmakers may hold a vote to approve the new cabinet on Dec. 21, Ponta said yesterday.
“The forthcoming period will not be easy for the new government since the 2013 budget still has to be prepared,” Laszlo said. “Cohabitation between the two leaders may not be smooth despite the re-appointment.”
The yield on 2022 dollar debt fell 5 basis points to a record 3.98 percent today, according to data compiled by Bloomberg.
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