The Hungarian forint extended gains on Monday, outperforming regional peers, while government bond yields retreated from a 10-year high with investors assessing potential positive news about talks over European Union funds.

The forint strengthened 0.6% to trade at 394.20 per euro. "On Wednesday, this topic [EU funds] will be discussed in the European Parliament, which could bring some negative noise," ING wrote in a note.

"But the final decision should be published by the European Commission next week on Thursday and we expect a positive outcome ... a positive tone from the European Commission should help the forint settle below the 400 EUR/HUF level." Long-term Hungarian government bond yields were 10-15 basis points lower after rising to a 10-year high on Friday, when investors priced in increasing interbank market rates and worries about stubborn inflation. "Liquidity is so low that it is easy for yields to jump in either direction," a fixed-income trader in Budapest said.

"Today yields are lower as the forint's rate and optimism about EU talks are both supportive. Trade volumes are still very low, as investors don't really want to commit to anything before they hear from Brussels on Wednesday." The yield on the 10-year bond was about 9.25%.

The Czech crown slid 0.20% to 24.594 per euro, as data showed inflation unexpectedly slowed in August for the first time since the central bank began a hefty policy tightening cycle in June 2021. In Romania, the leu traded 0.13% lower at 4.9064 versus the common currency as data showed inflation reaching 15.3% in August, a touch above expectations.

Central Europe has battled surging inflation with sharp interest rate rises since last year, but many policymakers are now largely looking to stabilise policy as price growth nears peaks and economies slow.

The Polish zloty edged down 0.11% to trade at 4.7075 per euro, as rate setter Ludwik Kotecki said inflation may remain at two-digit levels until the end of 2024, arguing interest rate hikes should be faster and stronger to curb price growth.

CEE SNAPSHOT AT MARKETS 1034 CET CURRENCIES Latest Previo Daily Change us bid close change in 2022 EURCZK Czech 24.5940 24.545 -0.20% +1.13 = crown 0 % EURHUF Hungary 394.2000 396.55 +0.60 -6.29% = forint 00 % EURPLN Polish 4.7075 4.7025 -0.11% -2.47% = zloty EURRON Romania 4.9064 4.9000 -0.13% +0.85 = n leu % EURHRK Croatia 7.5195 7.5245 +0.07 -0.03% = n kuna % EURRSD Serbian 117.3000 117.35 +0.04 +0.24 = dinar 00 % % Note: calculated from 1800 daily CET change Latest Previo Daily Change us close change in 2022 .PX Prague 1220.72 1199.2 +1.79 700 % .BUX Budapes 41281.06 40910. +0.91 -18.61 t 81 % % .WIG20 Warsaw 1555.26 1534.6 +1.34 -31.39 8 % % .BETI Buchare 11905.33 11876. +0.24 -8.85% st 73 % .SBITO Ljublja 1078.88 1067.7 +1.05 -14.07 P na 2 % % .CRBEX Zagreb 1981.71 1983.1 -0.07% -4.70% 1 .BELEX Belgrad 847.84 847.97 -0.02% +3.30 15 e % .SOFIX Sofia 609.09 605.20 +0.64 -4.18% % Yield Yield Spread Daily (bid) change vs change Bund in Czech spread Republi c CZ2YT= 6.2520 -0.012 +489b -6bps RR 2-year 0 ps CZ5YT= 5.1840 -0.110 +363b -13bps RR 5-year 0 ps CZ10YT 0 ps Poland PL2YT= 6.5850 -0.075 +522b -12bps RR 2-year 0 ps PL5YT= 6.3580 -0.045 +480b -6bps RR 5-year 0 ps PL10YT 0 ps FORWARD 3x6 6x9 9x12 3M interb ank Czech

Hungary Poland Note: are for ask prices FRA quotes *********************************************** *************** (Additional reporting by Pawel Florkiewicz in Warsaw; Editing by Sherry Jacob-Phillips)