* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr
By Yoruk Bahceli
AMSTERDAM, July 30 (Reuters) - German government bond yields
edged down towards two-month lows on Thursday as investor
attention turned to inflation and GDP readings in Europe after
the Fed left its policy unchanged.
The U.S. Federal Reserve left interest rates near zero on
Wednesday, suggesting hopes for a quick economic rebound are
dimming as coronavirus cases rise in a number of states. It
repeated a pledge to use its full range of tools for as long as
it takes to recover from the pandemic.
Attention turns to economic data releases on Wednesday, as
investors continue to take stock of a potential second wave of
coronavirus infections which could put Western economies back in
lockdown.
"Data is increasingly important now that the market has now
come to terms with a second wave," Mizuho analysts said.
Germany's GDP reading is due at 0800 GMT. A Reuters poll
expected an 11.3% decline year-on-year.
July inflation readings from German states, also due at 0800
GMT, are in focus before the national readings later in the
session -- expected to show inflation fall to 0.4% year-on-year,
from 0.8% in June.
ING analysts watching the inflation data noted Greek ECB
policymaker Yannis Stournaras' assertion that the trajectory of
the bank's emergency bond purchases will depend mostly on the
inflation outlook.
"To be clear, it would take a strong outsized upward
surprise for them to terminate the programme early but a soft
print would be perceived as adding to the case for more
stimulus," they said.
Euro zone sentiment indices due at 0900 GMT will also be
watched.
Germany's 10-year yield was down 1 basis point to -0.51% in
early trade, nearing two-month lows at -0.52% hit on Wednesday.
Italian 10-year yields were unchanged at 1.06%.
In the primary market, Italy is scheduled to re-open five
and 10-year bonds via auction.
(Reporting by Yoruk Bahceli, Editing by Timothy Heritage)