* Bond yields nudge down across region
* Pull back from multi-month highs
* Investors creep back into bonds after recent heavy selling
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By Dhara Ranasinghe
LONDON, Feb 9 Most euro zone government bond
yields pulled back from recent multi-month highs on Thursday, as
investors put aside worries about political risks and returned
to some of the bloc's most beaten-down markets.
An unpredictable French election campaign and talk that the
European Central Bank's monetary stimulus could be unwound
sooner rather than later have rattled regional bond markets in
France and riskier, peripheral markets such as Italy and
Portugal bore the brunt of the selling, when yields rose to
multi-month highs, earlier this week. But a sense that the
sell-off had gone too far provided some respite on Thursday.
"Today we have some relief with investors shrugging off some
of their concerns with a feeling that things went too far, too
fast," said Martin Van Vliet, senior rates strategist at ING.
France's 10-year bond yield, dipped 1 basis
point to 1 percent, holding below Monday's near 17-month high of
around 1.16 percent. That pushed the gap over safe-haven German
Bund yields to 70 basis points, narrowing from four-year highs
around 79 bps on Wednesday.
Italian and Spanish bond yields fell about 3 bps each, with
Italy's 10-year bond yield touching a two-week low at around
In contrast, German bonds, which have benefited from the
recent selling in euro zone peers, were a touch weaker. The
10-year German Bund yield rose 1 bps, pulling back from a 2
1/2-week low hit on Wednesday at 0.29 percent.
When a bond's price falls, the yield rises.
But with political risks very much in focus, analysts said
renewed worries about Greece could exacerbate investor sentiment
towards the bloc.
Greece's bailout programme is being held up by a dispute
about the country's fiscal targets. The International Monetary
Fund argues that a Greek fiscal surplus target of 3.5 percent of
gross domestic product cannot be met without massive debt relief
or further austerity measures that would hurt growth.
Germany, which contributes the most to Greece's bailout,
faces national elections in September, and it opposes any
discussion of debt relief before Greece reaches the bailout
Attention was expected to turn later in the day to a meeting
between German Chancellor Angela Merkel and ECB President Mario
Draghi in Berlin.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Reporting by Dhara Ranasinghe, editing by Larry King)