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* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr
(Updates prices, adds U.S. Treasuries)
By Yoruk Bahceli and Julien Ponthus
AMSTERDAM/LONDON, April 8 (Reuters) - Euro zone bond yields
dipped on Thursday amid uncertainty over the bloc's COVID-19
vaccination programme, while minutes of the European Central
Bank's March meeting showed policymakers were ready to reduce
bond purchases if conditions allowed.
Pressure also came from Treasury yields which fell following
worse-than-expected U.S. job data while dovish Federal Reserve
minutes released on Wednesday showed the central bank was in no
rush to raise interest rates.
In late afternoon trading, safe-haven euro zone bond yields
ticked lower, with Germany's 10-year yield, the benchmark for
the bloc, losing around 1.2 basis point at -0.33%.
Italian 10-year bond yields were down 3 basis points at
0.67%, keeping the closely watched risk premium with Bunds at
about 100 basis points but below the four-week high it touched
on Wednesday.
Minutes of the ECB's March meeting published on Thursday
showed policymakers debated a smaller increase in bond purchases
and agreed to front-load the buying this quarter on condition it
could be cut later if conditions allowed.
Monthly bond buys under the ECB's 1.85 trillion-euro
Pandemic Emergency Purchase Programme (PEPP) jumped by over a
fifth last month, enough to stabilize nominal bond yields and
push inflation-adjusted yields back to their early-year lows.
The central bank ramped up buying of sovereign bonds after a
surge in U.S. Treasury yields lifted borrowing costs in the bloc
and threatened Europe's tentative recovery.
Sources told Reuters at the time that hawkish policymakers
were sceptical about increasing the purchases and some saw
rising nominal bond yields as a potentially welcome sign of
economic recovery.
Repeating the bank's overall standing guidance, ECB
President Christine Lagarde said on Thursday that the 1.85
trillion euros set aside may not have to be spent in full but
could also be increased depending on market conditions.
Lagarde also said that while the resurgent pandemic would
weigh on euro zone growth over the coming months, the recovery
was expected to pick up once lockdowns are lifted.
Lagarde's comments came as data showed euro zone producer
prices rose at an accelerated year-on-year pace in February as
the cost of energy and intermediate goods went up, underlining
expectations of faster consumer price growth in the coming
months.
Euro zone consumer inflation jumped in March to 1.3%, taking
another step higher in what is likely to be a temporary but
sharp climb that may put consumer price growth above the
European Central Bank's target of near 2% later this year.
The ECB has predicted the surge, warning that inflation may
even exceed its target by the close of the year, but has
promised to look past what it expects to be a temporary increase
in its policy decisions.
Worries about the rollout of COVID-19 vaccines and its
consequence for the European economy have risen after European
regulators found a potential link between AstraZeneca's vaccine
and reports of rare brain blood clots.
The setback for the vaccine, a key component of the bloc's
inoculation efforts, comes as the euro area grapples with a new
wave of the virus. Spanish regions tightened lockdowns on
Wednesday and Germany's chancellor supported a tougher lockdown.
(Reporting by Yoruk Bahceli and Julien Ponthus; editing by John
Stonestreet, Larry King and Andrew Heavens)
