ZAGREB (Reuters) – Croatian financial markets celebrated the start of EU entry talks yesterday, with the kuna firming against the euro, the price of the 10-year eurobond at a new high and the stock market rising almost 4 percent. It was the first chance for markets to react to news that the EU had decided that Zagreb was now cooperating fully with the UN war crimes tribunal in The Hague and membership negotiations could begin. The Zagreb Stock Exchange Crobex index rose 81.23 points to 2,123.13 points in what the bourse said was unusually lively trade, while the local bond market was also bullish. «This should boost sentiment as reforms toward EU entry should create conducive conditions for renewed FDI inflows,» said Elisabeth Gruie, an analyst at BNP Paribas. The price of the 10-year Eurobond was quoted at 112/112.3 in the afternoon with the spread tightening to life-low 26 basis points from Monday’s 31 basis points over the benchmark German Bund. «That’s about the level where we see the long-term Eurobond for the time being. Further tightening could be expected if Croatia was awarded a higher credit rating,» a local fixed-income dealer said. Raiffeisenbank analysts said a credit rating upgrade for Croatia was possible over the next three to six months. Croatia is currently rated «BBB-» by Fitch and «BBB» by Standard & Poor’s. The opening of EU talks also boosted trade in local bonds denominated in euros. Shortly before the markets closed turnover on the local bond market surpassed 80 million euros. «The spread on the Finance Ministry’s longest-maturity RHMF-19 is quoted at some 70 basis points over the Bund and there is a lot of space for narrowing of spreads on local papers indexed to the euro,» another dealer said.