* Policy divergence keeps open gap between Bunds, Treasuries
* ECB expected to stay loose despite imminent Fed rate hike
* France 's Macron takes 1st round lead in poll for 1st time
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By Abhinav Ramnarayan
LONDON, March 9 The gap between German and U.S.
government bond yields held near eight-week highs as investors
awaited news from Thursday's ECB meeting, which is expected to
highlight the monetary policy divergence between the two
Higher-than-expected U.S. private sector employment numbers
on Wednesday boosted already-high chances of a rate hike when
the Federal Reserve meets next week and increases the chances of
further hikes later in 2017.
But in the euro zone, ECB President Mario Draghi is likely
to resist hawkish calls and maintain an ultra-loose policy
stance despite accelerating inflation, analysts said.
ING strategists said the central bank in Frankfurt would
look to soothe nerves ahead of potentially fractious elections
in the Netherlands and France, though recent polls have shown
momentum for far-right parties abating.
"The ECB will wait to see the political risks out of the way
and convincing signs that underlying inflation is on an upward
trajectory before tightening," said ING strategist Martin van
"There's been a lot of talk about (the ECB) changing the
forward guidance but we think that's premature," he said, a view
echoed by at least one other analyst.
Euro zone inflation surged to a four-year high of 2 percent
last month, zooming past the European Central Bank's target, but
underlying inflation held steady at 0.9 percent.
In a reflection of the sharp contrast in monetary policy on
either side of the Atlantic, the gap between the 10-year
borrowing costs of Germany and the United States hit 220 basis
points in early trade.
This was a shade below an eight-week high hit earlier this
week and only 16 bps below the December 2016 peak of 236 bps,
which was the widest since at least 1990.
Most euro zone bond yields were 1-2 bps higher before the
ECB policy decision, with 10-year German yields rising 1.6 bps
to 0.39 percent.
France's 10-year government bond yield was up 1.2 bps on
Thursday at 1.05 percent, largely in line with the rest of the
There were further signs of a loss of momentum for French
far-right presidential election candidate Marine Le Pen, after a
poll showed centrist Emmanuel Macron would come out ahead in the
first round before winning a runoff against her.
A Le Pen victory would be viewed with disfavour by the
market as she has said she plans to hold a referendum to take
France out of the single currency, potentially a hugely
disruptive event for the region.
"Le Pen seems to be losing a bit of momentum in the polls
and you see the same thing in the Netherlands (with nationalist
candidate) Geert Wilders," said van Vliet.
"...Let's see what the Dutch elections will bring - because
it will be a test whether the polls are accurate."
The Dutch parliamentary elections are scheduled for March
15. Dutch 10-year government bond yields hit a near three-week
high of 0.506 percent on Thursday, up 2 bps on the day.
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 Abhinav Ramnarayan; editing by John Stonestreet)