The state has a payment peak in July and dealers say it might have to pay 8-9% in yearly yields if it wants to borrow as much as it needs. The Finance Ministry is seeking to borrow 4.6 billion RON (slightly over one billion euros) from banks in July, considering it needs about three billion RON to pay for T-bills maturing this month. In addition, the state also has to repay 700 million euros for some eurobonds falling due. A tough battle over yields is thus taking shape, after the Treasury could afford to "twist the arm" of the banks in June, keeping yields on RON at less than 7% a year, at the cost of raising only one quarter of what it had set out to. Last month, Finance Minister Sebastian Vladescu started to talk about pressures from banks, which demanded yields in excess of 7% a year. Meanwhile, things have become more complicated as far as the Finance Ministry is concerned, with the Constitutional Court ruling against the pension cut, which led to the need to raise VAT from 19% to 24%, which hurts the economy directly. Unless something comes up, the IMF Board should approve the fifth tranche of the loan for Romania, worth 900 million euros. This money goes into the NBR reserve, though, so that the Finance Ministry has to raise cash from the market. The only help for the Finance Ministry might come from the NBR, which might leave more RON the market, to keep interest rates down. The National Bank, however, is now in a difficult position, as it has to cope with the pressure towards a depreciation of the RON. "How high the yield on T-bills will go depends on the exchange rate trend, on the extent of RON's depreciation. If there are pressures on the exchange rate and it reaches 4.4 or 4.5 RON/EUR, then the yields on T-bills could go up to 8 or 9%. If not, the central bank will try to leave some cash on the market for the Finance Ministry to borrow," a dealer comment