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CEE MARKETS-Czech crown surges on CPI rise, Hungarian bonds rally

* Crown jumps, CPI rise underpins cbank rate hike expectation

* Hungarian bond auction draws robust demand, yields drop

* Hungarian cbank is seen announcing new easing on Nov. 21

* Serbian central bank keeps rates on hold, dinar firms

* Leu retests 5-year lows on new central bank comments

(Adds Serbian central bank decision, Romanian central bank comments, Hungarian bonds rally) BUDAPEST, Nov 9 (Reuters) - The crown surged to 4-year highs against the euro on Thursday after Czech figures showed annual inflation accelerating further beyond the central bank's (CNB) 2 percent target. Hungary's forint touched a one-month low as October inflation was lower than expected, underpinning the Hungarian central bank's (NBH) policy of monetary easing. Czech inflation accelerated to 2.9 percent from 2.7 percent in September, and above an analysts' forecast of 2.8 percent. Hungary's inflation retreated to 2.2 percent from 2.5 percent, below analysts' 2.3 percent projection. The crown touched a 4-year high at 25.505 against the euro and retreated to 25.52 by 1206 GMT, still firmer by a third of a percent from Wednesday. The forint touched a one-month low at 312.44 after the inflation data, but rebounded after an auction of government bonds attracted robust demand, steadying at 311.99. The average yields were below secondary market levels and 10-year bonds were sold for the first time below U.S. Treasuries yields, at an average of 2.23 percent. Hungarian yields rebounded slightly after the auction, but sentiment remains good and the curve is below U.S. levels except for 15-year bonds, traders said. They said dovish comments by Hungary's central bank on Wednesday had reinforced expectations that it would announce new measures at its Nov. 21 meeting to push long-term interest rates lower. "They could say concretely what they will do to flatten the curve and achieve a shift to fixed mortgage lending interest rates," one Budapest-based trader said. The Czech central bank has increased interest rates twice since August. Expectations for more hikes to come are seen helping the crown lead a firming of currencies in the European Union's eastern wing in the next year, according to a Reuters poll of analysts. "With this (inflation) number, the pressure for breaking through the 25.500 level will grow," one Prague-based dealer said. " "We will see if it gets there but if it does, we could move to a range of some 25.20-25.50 for the next couple of months," the dealer said, adding that another rate hike may come in December. Serbia's central bank kept the region's highest benchmark central bank rate of 3.5 percent on hold on Thursday, after two surprise cuts in as many months. The dinar firmed 0.1 percent to 118.7 versus the euro. The Romanian leu retested Tuesday's five-year lows of 4.64 against the euro. On Tuesday, Romanian central bank Governor Mugur Isarescu's comments after a rate-setting meeting were interpreted as favouring a looser grip on the exchange rate. On Thursday Isarescu said too much tightening would not be conducive for an optimum policy mix. He also said the leu had underperformed regional peers largely because of Romania's large and rising trade deficit. Asked whether leu levels of more than 4.6 seen over the last few days were close to the currency's balance level, Isarescu said: "Relatively close."

CEE MARKETS SNAPSH AT 1306 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 25.520 25.598 +0.31 5.83% 0 0 % Hungary 311.99 311.96 -0.01% -1.02% forint 00 00 Polish zloty 4.2291 4.2353 +0.15 4.13%

%

Romanian leu 4.6374 4.6285 -0.19% -2.21% Croatian 7.5375 7.5403 +0.04 0.23% kuna % Serbian 118.70 118.85 +0.13 3.92% 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 1058.7 1054.0 +0.44 +14.8 0 7 % 8% Budapest 40155. 40122. +0.08 +25.4 48 07 % 7% Warsaw 2496.0 2513.3 -0.69% +28.1 7 4 4% Bucharest 7764.7 7777.2 -0.16% +9.59 2 7 % Ljubljana 789.71 792.07 -0.30% +10.0

5%

Zagreb 1834.7 1839.3 -0.25% -8.02% 9 9 Belgrade 729.14 730.57 -0.20% +1.64

%

Sofia 670.74 672.49 -0.26% +14.3

8% BONDS

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

Republic

2-year 0.433 0.121 +118b +11bp ps s 5-year 0.685 -0.033 +104b -6bps

ps

10-year 1.658 0.067 +129b +3bps

ps Poland

2-year 1.609 -0.001 +236b -1bps

ps

5-year 2.634 -0.003 +299b -3bps

ps

10-year 3.408 0.042 +304b +0bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.9 1 1.25 0

IBOR=>

Hungary <BU 0.08 0.09 0.14 0.03

BOR=>

Poland <WI 1.775 1.805 1.91 1.73

BOR=>

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

(Additional reporting by Jan Lopatka in Prague; Editing by Gareth Jones)