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CEE MARKETS-Bonds extend gains, Warsaw and Budapest stock test highs

* Zloty eases a touch on dollar rebound

* Budapest stocks touch record high, Warsaw almost 4-year high

* Hungarian bonds auction seen drawing strong demand

BUDAPEST/WARSAW, Oct 12 (Reuters) - Central European government bonds extended their gains on Thursday before an auction in Budapest which is expected to draw strong demand. A weakening of the dollar fuelled capital flows into the region's liquid currencies and government bonds this week. The U.S. currency regained some ground on Thursday, causing a minor retreat of the zloty against the euro in morning trade, while the forint stayed steady. But its weakness still fuels appetite for assets in emerging markets, including Central Europe. A correction in the euro/zloty was timely after the past days' gains, but it may appreciate again after the publication of the breakdown of September Polish inflation data, due at 1200 GMT, BZ WBK analysts said in a note. "The data should influence investors' expectations about the path of interest rates in Poland, bringing the date of the first (Polish central bank interest) rate hike closer," they said. Since the preliminary figures showed a rise in annual inflation two weeks ago, Polish forward rate agreements have surged, pricing in a start of hikes within 12 months. Most analysts have projected a later rise. The expectations, however, are not cutting demand for high-yielding Polish bonds which are also supported by capital flowing out of the dollar. In Hungary, traders expected robust demand for bonds which the government auctions on Thursday. Hungarian and Polish government bond yields dropped further "I expect strong demand, and the papers will be probably sold by a few basis points below the current market levels," one Budapest-based fixed income trader said. Budapest's stock index tested record highs in early trade and Polish shares set their highest level since late 2013, joining a global trend, before some retreat.

CEE MARKETS SNAPSH AT 1048 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 25.881 25.879 -0.01% 4.35% 0 5 Hungary 309.15 309.33 +0.06 -0.11% forint 00 50 % Polish zloty 4.2699 4.2666 -0.08% 3.14% Romanian leu 4.5900 4.5852 -0.10% -1.20% Croatian 7.5070 7.5105 +0.05 0.64% kuna % Serbian 119.30 119.46 +0.13 3.39% 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 1054.8 1054.3 +0.04 +14.4 1 7 % 5% Budapest 38526. 38453. +0.19 +20.3 68 12 % 8% Warsaw 2548.5 2551.7 -0.13% +30.8 3 8 3% Bucharest 8010.8 8004.8 +0.07 +13.0 3 4 % 7% Ljubljana 812.45 814.90 -0.30% +13.2

2%

Zagreb 1854.9 1849.3 +0.30 -7.01% 7 8 % Belgrade 725.73 726.96 -0.17% +1.17

%

Sofia 672.06 672.80 -0.11% +14.6

0% BONDS

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

Republic

2-year 0.057 0 +076b +1bps

ps

5-year 0.486 0.004 +076b +2bps

ps

10-year 1.357 -0.007 +091b +1bps

ps Poland

2-year 1.714 0 +241b +1bps

ps

5-year 2.693 -0.026 +296b -1bps

ps

10-year 3.387 -0.028 +294b -1bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.75 0.89 1 0

IBOR=>

Hungary <BU 0.07 0.105 0.16 0.03

BOR=>

Poland <WI 1.79 1.83 1.89 1.73

BOR=>

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

(Additional reporting by Luiza Ilie in Bucharest; Editing by Angus MacSwan)