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CEE MARKETS-Hungarian bond yields set record low ahead of auction

* Hungarian bond prices extend gains ahead of auction

* Long-term Hungarian bonds trade at record low yields

* C.bank measures to curb yields weigh on forint-dealer

* Leu is touch weaker ahead of no-confidence vote

BUDAPEST, Nov 23 (Reuters) - Hungarian long-term government bonds traded at record low yields on Thursday ahead of their first auction since the central bank (NBH) announced measures to push the yields lower. The decline bucked a rise in government debt yields in the euro zone, which crept up ahead of the release of minutes from the European Central Bank's October meeting. Elsewhere in Central Europe, Polish bond yields eased slightly as the country's central bank also prepared to publish the minutes of its last meeting later on Thursday. Hungarian bond yields dropped 1-3 basis points after a steep decline in recent weeks amid expectations that the NBH would take measures to flatten the yield curve and encourage mortgage lending. The NBH, one of the most dovish central banks in the world, announced on Tuesday that it would launch a big interest rate swap programme from January to push long-term yield lower, and also a mortgage note buying scheme. The government is due to sell 55 billion forints worth of 3-, 5- and 10-year bonds at its bi-weekly tender on Thursday. Five-year bonds traded at a yield of 1.07 percent ahead of the primary sale, which is expected to draw robust demand, mainly in the longer maturities. The 10-year benchmark bond traded at 2.09 percent. "The yields could drop even further from the current record lows at the auction," one Budapest-based fixed income trader said. "Later, yields could go even lower, but I do not think that there is room for a decline of more than 10-15 basis points," the dealer added. "After all, the actual measures will come only next year and we will need to see them." One currency dealer said the fall in yields may undermine the forint's position in its crosses with regional peers, the zloty and the crown. Regional economies grow robustly, and Poland's latest strong wage and industrial output data have triggered some expectations that the central bank there may start to raise interest rates sooner than late next year. Diverging expectations with the forint pushed the zloty on Wednesday to seven-month highs against the Hungarian currency . But a dollar sell-off late on Wednesday strengthened both currencies against the euro, and they retreated in tandem when European markets reopened, shedding 0.1 percent. Elsewhere, the leu was a shade weaker near record lows ahead of a no-confidence vote in Romania's parliament. The motion is likely to fail, but political uncertainty remains high, while a surge in wages has stoked up inflation.

CEE MARKETS SNAPSH AT 1007 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 25.480 25.487 +0.03 5.99% 0 5 % Hungary 313.01 312.75 -0.08% -1.34% forint 00 00 Polish zloty 4.2090 4.2051 -0.09% 4.63% Romanian leu 4.6530 4.6515 -0.03% -2.54% Croatian 7.5770 7.5775 +0.01 -0.29% kuna % Serbian 119.35 119.19 -0.13% 3.35% 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 1046.4 1046.6 -0.01% +13.5 9 1 5% Budapest 39933. 40131. -0.49% +24.7 59 37 8% Warsaw 2493.1 2489.5 +0.14 +27.9 0 0 % 9% Bucharest 7797.8 7772.9 +0.32 +10.0 5 6 % 6% Ljubljana 784.22 786.11 -0.24% +9.29

%

Zagreb 1863.3 1857.6 +0.31 -6.59% 9 5 % Belgrade 731.01 731.78 -0.11% +1.90

%

Sofia 668.29 669.38 -0.16% +13.9

6% BONDS

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

Republic

2-year 0.401 0.021 +109b +1bps

ps

5-year 1.014 0.131 +134b +12bp ps s 10-year 1.757 -0.025 +140b -3bps

ps Poland

2-year 1.556 0.001 +225b -1bps

ps

5-year 2.592 -0.012 +292b -2bps

ps

10-year 3.38 -0.008 +302b -2bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 1.03 1.21 1.34 0

IBOR=>

Hungary <BU 0.03 0.06 0.1 0.03

BOR=>

Poland <WI 1.79 1.84 1.9025 1.73

BOR=>

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

(Reporting by Sandor Peto)