* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
LONDON, Sept 14 (Reuters) - Euro zone bond yields steadied in early trade on Monday, with the benchmark German yield close to -0.5% as traders digested last week’s dovish tone from European Central Bank policymakers and looked towards the Federal Reserve’s two-day policy meeting.
The positive mood across equity markets on Monday -- largely on the back of renewed hopes for a coronavirus vaccine -- did not stir euro zone debt markets with moves in yields small and contained.
Euro zone yields had fallen at the end of last week after ECB chief economist Philip Lane and French central bank chief Francois Villeroy de Galhau highlighted risks from a strong currency, noting it clearly mattered for policy because it curbed price pressures.
That was after the ECB had taken an unexpectedly relaxed stance on growth and inflation at its regular policy meeting.
“Mr. Lane’s comments leave the door open for further monetary stimulus by the ECB,” Unicredit analysts said in a note.
“Although both EGB yields and spreads to Bunds have returned to their pre-pandemic levels...the information we get looking at breakeven inflation rates confirms that action by the ECB is still needed in order to revive investor inflation expectations.”
The Unicredit analysts noted that while the 10-year German Bund yield is at the same levels it was in late February before the coronavirus pandemic roiled markets, the 10-year breakeven inflation rate is 10 basis points lower.
In early trading on Monday, the 10-year German yield was unchanged at -0.493%, while the 2-year yield was 1 basis point lower at -0.699%.
Other markets were also quiet.
The Italian 10-year yield dropped 2 bps to 1.026% and the 30-year yield more than 1 bp to 1.949%.
This week is another busy period for central bank meetings, with the Bank of Japan and Bank of England meeting and, crucially, the Federal Reserve kicking off its two-day meeting beginning on Tuesday. (Editing by Kirsten Donovan)
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