April 27, 2018 / 8:10 AM / a month ago

CORRECTED-Euro zone bonds edge down as ECB helps markets regain footing

(Adds dropped word “yield” in second bullet point)

* Euro zone bond yields down 1-2 bps

* German 10-year bond yield drops to a week-low

* U.S yields fall after week of sell-off

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr

By Fanny Potkin

LONDON, April 27 (Reuters) - Euro zone bonds yields fell on Friday as a cautious European Central Bank helped markets regain their footing after a U.S led sell off earlier in the week.

ECB chief Mario Draghi played down concerns over softness in the euro zone economy on Thursday as the ECB sought to bolster expectations for a gradual withdrawal of the ECB’s monetary stimulus.

“With the ECB event risk behind us, and a dovish tilt still in place, we return to being bullish on Bund futures,” analysts at Mizuho said in a note.

U.S. Treasury yields fell on Thursday, with the U.S. 10-year yield dipping below 3 percent as buyers emerged following a week-long selloff spurred by concerns about rising inflation and growing borrowing by the U.S. government.

“There’s relief for euro zone bonds markets from the sharp U.S-led selloff we’ve seen over the last 7 days,” said Commerzbank rates strategist Rainer Guntermann.

“There’s underlying support from here on for Europe markets that has to do with the pent-up re-investments from the ECB portfolios, with high pay backs last week, and which still need to be re-invested by the national central banks.”

Euro zone borrowing costs were down 1-2 basis points across the board.

Germany’s 10-year bund yield, the benchmark for the bloc, dropped to a week low of 0.569 percent, before slightly inching up to 0.5750 percent. It was previously at a 6-week high of 0.655 percent on Tuesday.

German Bund yields are set for this biggest weekly fall in four weeks, according to Reuters data.

Later on Friday, the European Commission’s business and consumer confidence data is due, while the U.S. government will offer its initial snapshot of first quarter U.S. gross domestic product, which analysts polled by Reuters say likely grew at a 2.0 percent annualised pace. This was slower than the 2.9 percent rate set in the fourth quarter of 2017.

ECB policymakers Yves Mersch and Sabine Lautenschlaeger are due to give speeches at a conference.

Bank of England Governor Mark Carney and Chief Economist Andy Haldane are also due to speak in London.

Also on Friday, Italy plans to sell BTP bonds maturing in 2023 and 2028 for up to 5.75 billion. It will also auction up to 3.5 billion euros in CCTeu bonds due in 2025.

Reporting by Fanny Potkin, additional reporting by Dhara Ranasinghe Editing by Alison Williams

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