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CEE MARKETS-Fx, bonds firm, Romanian auction seen drawing good demand

* Bond yields drop as China dismisses report on U.S. debt buying

* Serbian central bank seen keeping rates on hold

BUDAPEST, Jan 11 (Reuters) - Central European currencies and government bonds mostly firmed on Thursday as appetite increased after Chinese regulators dismissed a media report the government is halting or reducing its purchases of U.S. debt. The region's government bond yields mostly dropped by a few basis points, after mostly rising on Wednesday tracking a rise in the 10-year U.S. Treasuries yield to a 10-month high. The dinar led a rise of regional currencies, firming 0.13 percent to 118.64 against the euro by 0935 GMT ahead of a meeting of the Serbian central bank. The bank, which sold euros in the market on Wednesday to support the dinar, is expected to keep its 3.5 percent benchmark rate on hold. With inflation running below its 3 percent target, the bank does not need higher rates, while it is also unlikely to cut the region's highest benchmark rate as U.S. interest rates are expected to rise this year, analysts have said. The Polish and the Hungarian central banks are not worried over inflation either. The Polish bank retained its loose policy stance on Wednesday. Hungary's forint firmed 0.12 percent to 309.05 against the euro. "The Chinese scare is over, and the Hungarian central bank (NBH) has not said anything rough either (to weaken the forint), so the markets (in the region) are back to normal," one Budapest-based fixed income trader said. NBH governor Gyorgy Matolcsy told weekly Figyelo that the bank's benchmark base rate must stay at a record low of 0.9 percent and interbank rates around zero for inflation to reach the 3 percent target by mid-2019 in a sustainable way.

With economic growth roaring ahead in the region, partly driven by surging wages, the Czech central bank started to raise its interest rates last year and Romania's bank on Monday.

Romania's 10-year bond yield dropped a tad to 4.18 percent on Thursday, joining the regional trend, and an auction of four-year papers is expected to draw healthy demand. "(The auction) should see good demand given the money market liquidity backdrop and print a cut-off yield near yesterday closing mid of 3.82 percent," ING analyst Ciprian Dascalu said in a note. Most Czech government bond yields also dropped, except for 2-year papers which were bid at 0.62 percent, up 9 basis points. Czech lawmakers postponed a confidence vote on Prime Minister Andrej Babis's minority government on Wednesday. Political developments rarely influence Czech markets. The crown traded 0.08 percent firmer, at 25.534 versus the euro.

CEE SNAPSHO AT MARKETS T 1035

CET CURRENC IES

Latest Previou Daily Change

s

bid close change in 2018 Czech <EURCZK 25.5340 25.5550 +0.08% +0.03% crown => Hungary <EURHUF 309.050 309.420 +0.12% +0.60% forint => 0 0 Polish EURPLN 4.1745 4.1760 +0.04% +0.04% zloty => Romanian <EURRON 4.6369 4.6410 +0.09% +0.92% leu => Croatian <EURHRK 7.4480 7.4485 +0.01% -0.24% kuna => Serbian <EURRSD 118.640 118.800 +0.13% -0.12% dinar => 0 0 Note: calculated from 1800 daily CET

change

Latest Previou Daily Change

s

close change in 2018 Prague 1102.06 1101.73 +0.03% +2.22%

00

Budapest 39595.3 39651.2 -0.14% +0.55% 7 3 Warsaw <.WIG20 2507.38 2511.27 -0.15% +1.88% > Buchares 8088.68 8034.85 +0.67% +4.32%

t

Ljubljan <.SBITO 816.44 818.42 -0.24% +1.25% a P> Zagreb <.CRBEX 1857.16 1857.69 -0.03% +0.78% > Belgrade .BELEX 768.29 767.53 +0.10% +1.12%

15>

Sofia <.SOFIX 705.70 697.93 +1.11% +4.17% >

BONDS

Yield Yield Spread Daily (bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT= 0.6200 0.0900 +124bp +9bps RR> s 5-year <CZ5YT= 0.9270 -0.0060 +114bp +1bps RR> s <CZ10YT 1.6750 -0.0340 +122bp -1bps 10-year =RR> s

Poland

2-year <PL2YT= 1.6110 -0.0150 +223bp -1bps RR> s 5-year <PL5YT= 2.5470 -0.0400 +276bp -2bps RR> s <PL10YT 3.2900 -0.0430 +284bp -2bps 10-year =RR> s FORWARD RATE AGREEME

NT

3x6 6x9 9x12 3M

interba nk

Czech <CZKFRA 1.03 1.20 1.33 Rep ><PRIBO

R=>

Hungary <HUFFRA 0.09 0.06 0.10 0.03 ><BUBOR

=>

Poland <PLNFRA 1.75 1.78 1.88 1.72 ><WIBOR

=>

Note: are for ask FRA prices

quotes

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(Additional reporting by Luiza Ilie in Bucharest; editing by Ralph Boulton)