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CEE MARKETS-Hungarian bonds rally to records on central bank pledges

* Hungarian 10-year yield spread over Bunds at record low

* Assets rangebound, investors await guidance from ECB

* German election watched, unlikely to unsettle markets

(Adds zloty and crown gains, Polish data, new comment) BUDAPEST, Sept 22 (Reuters) - Hungarian government bonds extended their rally on Friday due to expectations the central bank will continue to support the market despite a gradual worldwide monetary tightening. The yield on 10-year bonds was fixed down 13 basis points at 2.52 percent, the lowest ever. Its 208-basis-point spread over corresponding Bunds was also a record low. The Hungarian Central Bank (NBH) cut its overnight deposit rate deeper into the red on Tuesday and pledged to use further tools to push market interest rates lower along the curve. Investors expect it to maintain loose conditions for years, even if global interest rates continue to rise, traders said. "Negative short-term yields mean a capital loss and that nudges investments into longer maturities," one Budapest-based trader said. "Hungary's central bank is going against the grain ... (but) the feeling is that the set-up they have could work and stay stable in the next years." The forint traded flat at 309.80 at 1239 GMT. The NBH's dovish signals and measures have knocked it down from 28-month highs set a month ago beyond 302. The bank could keep it around 310, market participants said. The Czech central bank chose a different route last month when it lifted interest rates, the first such move in the European Union since 2012. It is seen lifting rates further. Some investors expect the next hike to come at the bank's next meeting, on Sept. 27. The Czech crown set a 3-week high at 26.03 against the euro, before retreating to 26.05. The zloty firmed 0.1 percent to 4.2704. Data released on Friday showed a fall in Poland's unemployment rate to 25-year lows at 7 percent, another sign of robust growth in Central European economies. Poland's annual growth will probably exceed 4 percent, KBC analysts said in a note. "A risk of delivering hawkish comments based on overheating fears of some MPC members (rate-setters) has definitely increased," they said. Central European assets mostly moved little as investors awaited signs from the European Central Bank on whether it will follow the slow tightening signaled by the Federal Reserve on Wednesday. Elections in Germany, the region's biggest export market, over the weekend are also being watched. With Angela Merkel's conservatives maintaining a strong lead, the outcome is unlikely to unsettle Central European markets. "The key thing that investors in the region are waiting for is the guidance the ECB will give in October," said Eszter Gargyan, analyst at Citigroup in Budapest.

CEE MARKETS SNAPSH AT 1439 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.050 26.066 +0.06 3.67% 0 5 % Hungary 309.80 309.79 +0.00 -0.32% forint 00 00 % Polish zloty 4.2704 4.2756 +0.12 3.13%

%

Romanian leu 4.5970 4.5990 +0.04 -1.35%

%

Croatian 7.4840 7.4815 -0.03% 0.95%

kuna

Serbian 119.10 119.21 +0.09 3.57% dinar 00 00 % Note: daily calculated previo close 1800 change from us at CET

STOCKS

Latest Previo Daily Change

us

close change in

2017

Prague 1046.5 1047.8 -0.12% +13.5 2 0 5% Budapest 38082. 38109. -0.07% +19.0 42 21 0% Warsaw 2464.5 2468.7 -0.17% +26.5 0 2 2% Bucharest 7862.9 7886.1 -0.29% +10.9 5 3 8% Ljubljana 799.42 801.25 -0.23% +11.4

0%

Zagreb 1826.1 1827.5 -0.07% -8.45% 8 4 Belgrade 725.19 732.52 -1.00% +1.09

%

Sofia 678.65 677.65 +0.15 +15.7 % 3%

BONDS

Yield Yield Spread Daily (bid) change vs change Bund in Czech spread

Republic

2-year -0.215 0.011 +046b +0bps

ps

5-year 0.109 -0.091 +036b -10bps

ps

10-year 1.132 -0.05 +067b -6bps

ps Poland

2-year 1.796 -0.012 +247b -2bps

ps

5-year 2.723 -0.003 +297b -1bps

ps

10-year 3.372 -0.002 +291b -1bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.69 0.85 0.94 0

IBOR=>

Hungary <BU 0.07 0.09 0.125 0.05

BOR=>

Poland <WI 1.79 1.84 1.89 1.73

BOR=>

Note: FRA are for ask quotes prices ******************************************************** *****

(Additional reporting by Jason Hovet in Prague; Editing by Andrew Heavens)