* Bond yields broadly lower
* Euro strength, “risk-off” lifts demand for bonds
* Germany to sell 3 billion euros of 10-year debt
* U.S. yield curve flattens further
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By Dhara Ranasinghe
LONDON, Nov 15 (Reuters) - Borrowing costs in the euro area fell on Wednesday as the single currency rallied to its highest levels in almost three weeks, allowing regional debt markets to recover some ground from a heavy sell off in the past week.
Boosted by strong German economic growth data on Tuesday, the euro rose to 1.1830 — its highest level since the European Central Bank meeting on Oct. 26.
Currency strength, which puts downward pressure on inflation, usually bodes well for the bond market. In addition, analysts said a fall in U.S. Treasury yields and weaker equity markets bolstered demand for safe-haven debt.
The combination put bond markets on firmer ground even as fresh bond supply loomed. Germany, the euro zone’s benchmark bond issuer, is scheduled to sell 3 billion euros of 10-year bonds later this session.
German 10-year bond yields fell 2 basis points to 0.38 percent, down from more than two-week highs hit on Tuesday at 0.43 percent. Thirty-year German bond yields were 2.5 bps lower at 1.20 percent.
“Core bond markets are on a stronger footing and the euro is certainly helping,” said Commerzbank rates strategist Rainer Guntermann. “Markets also shrugged off stronger data from yesterday.”
Across the euro area, 10-year bond yields were down 1-2 bps.
Bond markets have come under heavy selling pressure sparked by a large sale of German bond futures last week and exacerbated by heavy bond supply this week. Investors often push bond prices down, and yields up, to make way for new bonds.
Focus was expected to turn to U.S. inflation data later in the session.
U.S. Treasury two-year note yields touched a nine-year high on Tuesday, while those on long-dated debt fell as the yield curve flattened for a second straight day and investors braced for another Federal Reserve interest-rate rise in December.
A flattening of the yield curve typically suggests the Fed is on track to raise U.S. rates, pushing yields on the short end higher, while low inflation is seen limiting those on longer-dated bonds.
Chicago Federal Reserve Bank President Charles Evans said early on Wednesday he is worried about a drop in U.S. inflation expectations, and called for the U.S. central bank to respond by flagging the likelihood of higher inflation ahead.
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Reporting by Dhara Ranasinghe; Editing by Catherine Evans