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CEE MARKETS-Czech bond yields set multi-year highs on rate hike bets

* Czech bond yields rise further, highest since 2014

* Hampl comments underpin rate hike bets, says no big hike needed

* Czech, Polish bond sales draw sound demand despite hike bets

* Hungarian bonds firm, MOL boosts Budapest stocks to record high

(Adds auction results, Polish rate hike expectations, Budapest stocks) BUDAPEST/PRAGUE, Oct 25 (Reuters) - Czech bond yields rose to their highest levels since 2014 on Wednesday after expectations for a Czech central bank (CNB) interest rate hike next month were reinforced by comments from a policymaker. CNB Vice-Governor Mojmir Hampl said that rates should go up and that the crown remained overbought. The crown reached four-year highs on Tuesday after rate setter Tomas Nidetzky said that it had not firmed enough to prevent a tightening and that the bank could consider tripling its main rate to 0.75 percent when it meets on Nov. 2.

The currency steadied at 25.588 per euro by 1308 GMT after Hampl said he preferred a standard, 25 basis-point hike rather than a bigger step up in borrowing costs. The mid-yields on Czech government were at their highest levels since 2014 according to Reuters data. Foreigners bought tens of billions of euros worth of crowns before the CNB removed its cap keeping the currency weaker than 27 per euro for years. Analysts said it will be a tough balancing act for the CNB to manage its rate hike cycle without discouraging expectations for more hikes and kicking out a key leg supporting the crown's strength. "Whereas we see more CZK (crown) appreciation potential, given that CZK still remains somewhat undervalued against the euro, the current speed of appreciation in our view increases the risks for setbacks," Raiffeisen analysts said in a note. "Such a setback could occur when rate hike speculation loses momentum, or if foreign investors see the scope for additional CZK appreciation diminishing," the note said. Expectations for a central bank rate hike have also been strengthening in Poland in recent weeks. in an 84 percent chance of a 25 basis point hike in nine months. Even though higher rates cut the value of bond investments, Prague's and Warsaw's government bond auctions drew solid demand, with the Czech sale also helped by a relatively low offered amount. Polish yields rose slightly after the auction amid concern that the European Central Bank may shift towards a policy of less monetary stimulus at its meeting on Thursday, Pekao SA analyst Arkadiusz Urbanski said. Hungarian yields dropped by 1-5 basis points, mainly at the long end of the curve, after dovish comments on Tuesday from the Hungarian central bank. Budapest's main equities index hit a record low, boosted by a 2.1 percent rise in MOL after the European Commission cleared 131 million euros of investment aid to the oil group from the Hungarian government.

CEE MARKETS SNAPSH AT 1508 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 25.588 25.595 +0.03 5.55% 0 5 % Hungary 310.00 310.30 +0.10 -0.38% forint 00 00 % Polish zloty 4.2340 4.2457 +0.28 4.01%

%

Romanian leu 4.5969 4.5967 +0.00 -1.35%

%

Croatian 7.5160 7.5137 -0.03% 0.52%

kuna

Serbian 119.48 119.55 +0.06 3.24% 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 1063.7 1051.4 +1.17 +15.4 6 6 % 2% Budapest 39913. 39411. +1.27 +24.7 36 36 % 2% Warsaw 2458.7 2448.4 +0.42 +26.2 1 5 % 2% Bucharest 7852.9 7890.9 -0.48% +10.8 7 0 4% Ljubljana 804.82 803.99 +0.10 +12.1 % 6% Zagreb 1882.5 1888.8 -0.33% -5.63% 7 1 Belgrade 727.55 727.18 +0.05 +1.42 % % Sofia 652.30 652.55 -0.04% +11.2

3% BONDS

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

Republic

2-year 0.409 0.048 +111b +5bps

ps

5-year 0.832 0.047 +107b +3bps

ps

10-year 1.699 0.018 +120b -1bps

ps Poland

2-year 1.685 -0.019 +239b -2bps

ps

5-year 2.703 0.027 +294b +1bps

ps

10-year 3.445 0.054 +295b +3bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.89 0.93 1.23 0

IBOR=>

Hungary <BU 0.1 0.12 0.16 0.03

BOR=>

Poland <WI 1.782 1.86 1.953 1.73

BOR=>

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

(Additional reporting by Bartosz Chmielewski and Marcin Goettig in Warsaw; Editing by Peter Graff and Hugh Lawson)