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CEE MARKETS-Leu, on CPI jump, misses USD-driven fx/bond firming

* Continuing dollar slide fuels forint, zloty rally

* Sept CPI jump keeps lid on Romanian fx, bond prices

* Czech bond auction seen drawing "reasonable demand"-traders

BUDAPEST/BUCHAREST, Oct 11 (Reuters) - The leu bucked a Central European currency rally on Wednesday due to worries over a bigger-than-expected jump in Romania's inflation and tension over a planned government reshuffle. The region's most liquid units, the zloty and the forint, firmed 0.3 and 0.2 percent, respectively, against the euro. They have been strengthened in the past two days by money flowing out of the weakening dollar. The leu, after a rise earlier this month amid a liquidity squeeze in Romanian interbank markets, has missed that rally. Prime Minister Mihai Tudose announced on Monday that he considered a government reshuffle due to corruption allegations against three ministers, in a move that could create tension within the ruling Social Democrat party. On top of political worries, September figures released early on Wednesday showed a continuing rise in Romanian annual inflation, to a higher-than expected 1.8 percent from 1.2 percent in August. The leu eased a tad to 4.587. Romania's 3-year bonds traded at a steady 2.29 percent yields, even though Tuesday's one billion euros eurobond issue eased the government's financing need, while Polish and Hungarian yields fell 4-5 basis points across the curve. Analysts and the Romanian central bank (NBR) are now likely to revise their year-end inflation forecasts upwards. Ionut Dumitru, chief economist at Raiffeisen Bank in Bucharest, said his already raised estimate of 2.4 percent "has now probably become optimistic." "The central bank will tighten (policies) sooner rather than later, probably," he said. "In November it will probably further reduce the corridor between its lending and deposit facilities, which I still see as a tightening. Benchmark interest rate tightening will come next year," Dumitru added. An expected rise in government spending later this year could help ease the liquidity squeeze, for which the government has criticized the NBR, but could increase worries over a rise in inflation pressure and the budget deficit. The bank, fearing speculative capital flows, has said signals from the European Central Bank and the Polish central bank (NBP) could influence local decisions. While the ECB hesitates, the NBP is unlikely to lift rates any time soon, though a surge in forward rate agreements this month priced in a start of rate hikes within 12 months. Most analysts have projected a later rise. Elsewhere in the region, a Czech government bond auction is expected to generate "reasonable demand," Komercni Banka traders said in a note, adding that the government could cut the supply if the prices offered are too low.

CEE MARKETS SNAPSH AT 1020 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 25.890 25.869 -0.08% 4.31% 0 5 Hungary 309.83 310.65 +0.26 -0.33% forint 00 00 % Polish zloty 4.2845 4.2926 +0.19 2.79%

%

Romanian leu 4.5870 4.5860 -0.02% -1.13% Croatian 7.5015 7.5025 +0.01 0.71% kuna % Serbian 119.37 119.43 +0.05 3.33% 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 1053.3 1050.0 +0.31 +14.2 5 6 % 9% Budapest 37978. 38031. -0.14% +18.6 25 67 7% Warsaw 2534.8 2516.4 +0.73 +30.1 8 9 % 3% Bucharest 7999.5 8022.5 -0.29% +12.9 2 1 1% Ljubljana 812.87 812.39 +0.06 +13.2 % 8% Zagreb 1829.5 1820.6 +0.49 -8.29% 2 6 % Belgrade 725.95 727.23 -0.18% +1.20

%

Sofia 674.46 676.26 -0.27% +15.0

1% BONDS

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

Republic

2-year 0.142 0.205 +084b +21bp ps s 5-year 0.517 0.025 +078b +2bps

ps

10-year 1.401 0.059 +094b +5bps

ps Poland

2-year 1.747 -0.02 +245b -1bps

ps

5-year 2.73 -0.012 +299b -2bps

ps

10-year 3.436 -0.036 +298b -5bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.75 0.91 1.02 0

IBOR=>

Hungary <BU 0.09 0.13 0.18 0.03

BOR=>

Poland <WI 1.766 1.814 1.881 1.73

BOR=>

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

(Additional reporting by Jason Hovet in Prague/Marcin Goettig in Warsaw; editing by Peter Graff)