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German bond yields fall to 2-week lows as U.S. stocks, vaccine pause hit risk appetite

* Euro zone periphery govt bond yields

AMSTERDAM, Sept 9 (Reuters) - Safe-haven German government bond yields hit new two-week lows on Wednesday as the fall in U.S. tech stocks and the halt of a coronavirus vaccine trial all dented risk appetite.

A sell-off in high-flying U.S. technology shares, fuelled partly by concerns around excess purchases of call options, has increased the risk of a larger correction across other markets.

Risk sentiment also took a hit after AstraZeneca Plc paused a late-stage trial for one of the leading COVID-19 vaccine candidates due to an unexplained illness in a study participant.

Hopes for a steady recovery in global economic demand have also been hurt by a rebound in the coronavirus crisis in countries including India, Britain and Spain, pushing oil futures to their lowest since June.

“The likelihood that a vaccine will soon bring about swift normalization is looking less likely,” Mizuho analysts told clients.

Euro zone bond yields fell across the board in early trade as the uncertainty boosted demand for safe-harbour assets. 10-year German yields hit a new two-week low at -0.51% .

Italian bond yields edged down, with the 10-year yield down 4 basis points at 1.06%, while the closely watched risk premium paid over 10-year German bonds edged down to 156 bps from Tuesday’s one-month highs.

UniCredit analysts said they expect U.S. tech shares to remain the main driver of bond markets on Wednesday, given a light data calendar.

Analysts were also focusing on Thursday’s European Central Bank meeting. While no change is expected to the bank’s policy, its inflation forecasts and messaging around its willingness to deploy its bond purchases will be closely watched.

In the primary market, Germany will sell 4 billion euros ($4.71 billion) of 10-year bonds, while Portugal will raise 1 to 1.25 billion euros via 10-year and 25-year bonds, both via auction. ($1 = 0.8495 euros) (Reporting by Yoruk Bahceli; Editing by Christopher Cushing)