CEE MARKETS-Romanian bonds ease as CPI hits 5-year high; Serbia seen holding rates

rates@

* High Romanian CPI may dent bond auction Serbian central bank meets; not seen cutting rates further

* Hungarian bond auction expected to draw strong demand

BUDAPEST, April 12 (Reuters) - The leu firmed and Romanian government bond yields rose slightly after the country reported a rise in annual inflation to its highest level since 2013, which may hit demand at a debt auction in Bucharest. The inflation increase, driven by the European Union's fastest wage rises, is in contrast with a retreat in inflation rates in most of the region. The jump to 5 percent was a tad above analyst forecasts and coincided with other figures showing a month-on-month fall in Romania's industrial output in February.

In annual terms, output was still rising at a robust 6.7 percent rate and growth is seen roaring on, but the rise in inflation and the current account deficit are fuelling concern about the economy's balance. The trends have been well flagged by the Romanian central bank and the high inflation figure underpins expectations that the bank will continue to raise interest rates to push inflation lower. The leu, which has been quite stable since the bank launched its rate hike cycle in January, firmed mildly against the euro by 0842 GMT. Romanian bond yields climbed by a few basis points, with the 5-year paper bid at a yield of 3.99 percent, up 6 basis points. An auction of 2024-expiry bonds is likely to attract "defensive bids" after the inflation figures, around Wednesday's closing bids of 4.16 percent, ING analysts said in a note. "A rejection of the auction is also possible as ROMGBs have been rather divergent lately, compared to regional developments." they said. The country's bonds missed a decline in yields in Budapest and Warsaw. Polish 5- and 10-year bond yields fell this week to their lowest levels since 2016, helped by mild March inflation data which led the Polish central bank to reaffirm its loose policy stance on Wednesday. In Hungary, Prime Minister Viktor Orban's right-wing government won a third successive term in Sunday's elections, boosting government bonds as policies remain predictable. Hungarian bonds were steady on Thursday ahead of an auction which traders said was likely to draw solid demand. The dinar was steady ahead of the Serbian central bank meeting, which is expected to keep the region's highest central bank benchmark rate on hold at 3.25 percent, after a cut last month.

CEE SNAPSHOT AT MARKETS 1055 CET

CURRENCI ES

Latest Previous Daily Change bid close change in 2018 Czech <EURCZK= 25.3150 25.2980 -0.07% +0.90% crown > Hungary <EURHUF= 311.2900 311.4400 +0.05% -0.12% forint > Polish <EURPLN= 4.1885 4.1863 -0.05% -0.29% zloty > Romanian <EURRON= 4.6620 4.6635 +0.03% +0.38%

leu

Croatian <EURHRK= 7.4200 7.4320 +0.16% +0.14% kuna > Serbian <EURRSD= 118.2200 118.2300 +0.01% +0.24% dinar > Note: calculated from 1800 CET

daily change

Latest Previous Daily Change close change in 2018 Prague 1128.65 1124.030 +0.41% +4.68%

0

Budapest 38086.30 37971.57 +0.30% -3.28% Warsaw 2274.67 2271.93 +0.12% -7.58% Bucharest 8879.46 8828.34 +0.58% +14.52% Ljubljana <.SBITOP 832.91 829.29 +0.44% +3.29% > Zagreb 1793.46 1805.03 -0.64% -2.68% Belgrade <.BELEX1 737.88 737.79 +0.01% -2.88%

5>

Sofia 659.79 660.64 -0.13% -2.61%

BONDS

Yield Yield Spread Daily (bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=R 0.7340 -0.0830 +130bps -8bps

R>

5-year <CZ5YT=R 1.1770 -0.0260 +126bps -3bps

R>

10-year <CZ10YT= 1.7790 -0.0090 +128bps -1bps

RR> Poland

2-year <PL2YT=R 1.5160 0.0040 +208bps +1bps

R>

5-year <PL5YT=R 2.2310 -0.0110 +232bps -1bps

R>

10-year <PL10YT= 2.9970 0.0160 +250bps +2bps

RR>

FORWARD RATE AGREEMEN

T

3x6 6x9 9x12 3M

interban k

Czech Rep 0.95 1.06 1.19 0.90

<PRIBOR=

>

Hungary 0.07 0.10 0.18 0.00 Poland 1.73 1.73 1.75 1.70

Note: FRA are for ask prices quotes

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(Additional reporting by Luiza Ilie in Bucharest; editing by Andrew Roche)