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CEE MARKETS-Bonds, fx firm after Fed decision

* Poland leads government bond yield fall after Fed meeting

* Yield curves flatten, long-term bond selling deals reversed

BUDAPEST/WARSAW, March 22 (Reuters) - Poland led a rebound of government bonds and currencies in Central Europe on Thursday after the Federal Reserve held back from increasing the pace of this year's rate hikes. Higher U.S. interest rates make assets in European emerging markets relatively less attractive, and some investors had expected the Federal Reserve to signal three more rate rises this year. The Federal Reserve raised interest rates and instead projected two more hikes for this year. That reduced concern that loose monetary policy in Poland and Hungary could undermine their currencies and bonds. The zloty, the Czech crown and the leu firmed 0.1 percent against the euro by 0908 GMT, drifting off the multi-month lows they reached in the past days. The forint, which outperformed this month, eased 0.1 percent. Government bonds in the region mostly regained part of the past week's price loss as yields eased, mainly in five-year or longer maturities. Poland led the fall, with its 10-year yield falling 9 basis points to 3.284 percent, still above last week's lows at 3.23 percent. Hungary's long-term bond yields dropped 3-5 basis points. "This is happening partly because of positioning: selling positions built before the Fed meeting are closed," one Budapest-based fixing income trader said. "The other thing is that what the Fed forecasts for the longer term (in terms of a rise in inflation and interest rates) is not realistic in the view of many people," the trader added. The Czech and Romanian central banks have already started to follow the Fed's rate rises, rate setters in Budapest and Warsaw have projected that interest rates could stay low for years. The Polish bank cut its inflation forecasts this month. Rate setter Jerzy Zyzynski said on Thursday that the bank's next rate move may be a cut rather than a hike. Polish bonds could strengthen across the curve in the next week or two, ING analysts said in a note. "This will be helped by a fall in expectations for rate hikes and data published on core markets (mainly euro zone)," they said. "The market still prices in significantly more tightening (about 40 bps until the end of 2019) than suggested by MPC members' comments," the note added. Most analysts in a Reuters poll have projected that the Romanian central bank will lift interest rates further on April 6. But an auction of Romanian bonds, which expire in June 2019, could draw sufficient demand on Thursday after a rise in Romanian yields in the past months, Raiffeisen said in a note, adding that front-end yields could rise further.

CEE SNAPSHOT AT MARKETS 1008 CET

CURRENCI ES

Latest Previous Daily Change bid close change in 2018 Czech <EURCZK= 25.3850 25.4050 +0.08% +0.62% crown > Hungary <EURHUF= 311.6000 311.2700 -0.11% -0.22% forint > Polish <EURPLN= 4.2253 4.2300 +0.11% -1.16% zloty > Romanian <EURRON= 4.6650 4.6690 +0.09% +0.32% leu > Croatian <EURHRK= 7.4430 7.4405 -0.03% -0.17% kuna > Serbian <EURRSD= 118.3500 118.4500 +0.08% +0.13% dinar > Note: calculated from 1800 CET

daily change

Latest Previous Daily Change close change in 2018 Prague 1128.90 1126.460 +0.22% +4.71%

0

Budapest 38127.86 38236.94 -0.29% -3.17% Warsaw 2319.48 2320.77 -0.06% -5.76% Bucharest 8692.32 8790.59 -1.12% +12.10% Ljubljana <.SBITOP 820.58 822.77 -0.27% +1.76% > Zagreb 1837.99 1839.08 -0.06% -0.26% Belgrade <.BELEX1 755.45 756.71 -0.17% -0.57%

5>

Sofia 669.83 669.62 +0.03% -1.12%

BONDS

Yield Yield Spread Daily (bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=R 0.8390 -0.0240 +142bps -1bps

R>

5-year <CZ5YT=R 1.3170 0.0170 +137bps +5bps

R>

10-year <CZ10YT= 1.9850 0.0000 +142bps +3bps

RR> Poland

2-year <PL2YT=R 1.5560 -0.0100 +214bps +0bps

R>

5-year <PL5YT=R 2.4320 -0.0740 +248bps -4bps

R>

10-year <PL10YT= 3.2960 -0.0760 +273bps -5bps

RR>

FORWARD RATE AGREEMEN

T

3x6 6x9 9x12 3M

interban k

Czech Rep 0.97 1.07 1.25 0.90

<PRIBOR=

>

Hungary 0.07 0.10 0.18 0.03 Poland 1.73 1.75 1.77 1.70

Note: FRA are for ask prices quotes

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(Reporting by Sandor Peto Editing by Alison Williams)