* Bund yield off 3-month high
* Focus turns to Fed meeting, ECB QE, tiering
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By Dhara Ranasinghe
LONDON, Oct 29 (Reuters) - Germany’s benchmark 10-year bond yield hovered just below three-months highs on Tuesday as investors waited for a fresh steer before pushing borrowing costs any higher.
Government bond yields across the single currency bloc rose sharply on Monday after the European Union granted Britain a Brexit extension and upbeat news on U.S.-China trade talks lifted optimism in world markets, denting safe-haven assets.
With the U.S. Federal Reserve concluding a two-day meeting on Wednesday, trading was expected to be largely range bound. The Fed is widely expected to cut interest rates by 25 basis points for the third time this year.
“The Fed is by far the most important factor now,” said Antoine Bouvet, senior rates strategist at ING.
“There is a gap in expectations over whether the Fed will cut rates and pause or signal further easing because of a deterioration in the data.”
In early trade, most 10-year bond yields across the bloc were around one basis point lower on the day .
Germany’s 10-year Bund yield dipped to hover around -0.34% , off a three-month high hit on Monday.
It is up 23 basis points so far in October and set for its biggest monthly jump since early 2018, largely driven by optimism that Britain will avoid a no-deal Brexit.
That in turn has helped ease concern about the global growth outlook, pushing longer-dated 30-year bond yields back into positive territory and steepening the German yield curve.
Still, with Brexit uncertainty likely to be replaced by election uncertainty in Britain, any selling in safe-haven bond markets would likely be limited for now, analysts said.
Britain’s parliament on Monday rejected Prime Minister Boris Johnson’s third attempt to schedule a Dec. 12 election. Johnson has said he will try again, by a different legislative route that would only require a simple majority.
The re-starting of European Central Bank asset purchases on Wednesday was also expected to support euro zone bond markets near term.
Wednesday also sees the launch of the ECB’s new tiered rate to help mitigate the side effects of negative interest rates on the banking sector.
Reporting by Dhara Ranasinghe; Editing by Mark Potter