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UPDATE 2-Euro zone yields hover near lows as splits appear in ECB

* German 10-year yield little changed near -0.52%

* ECB policymaker says recent euro rally is a worry

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Adds ECB story, updated prices)

LONDON, Sept 28 (Reuters) - Euro zone bond yields hovered near recent lows on Monday as reports emerged of a split within the European Central Bank over how to steer the economy through a second wave of COVID-19 that could lead to more lockdown measures.

Reuters conversations with eight ECB insiders showed the bank’s policymakers are increasingly divided over the matter, threatening President Christine Lagarde’s hard-won peace.

Having risen in early trades on optimism around improved Chinese economic data, the benchmark German bond yield was again flat on the day as the session closed at -0.53%.

At this level, it is within touching distance of a 1-1/2 month low of -0.539% hit last week.

Most other euro zone bond yields also ended the day unchanged, reversing earlier rises.

ECB policymaker Ignazio Visco said on Sunday a recent strengthening in the euro’s exchange rate was a worry and would warrant a reaction from the central bank if it dragged inflation further away from its goal.

“With souring risk sentiment and recent ECB ‘dovespeak’, EUR rates have already a degree of easing imbedded in them,” ING analysts said in a research note.

“A weak inflation number and further dovish soundbites at the ECB watchers’ conference would only reinforce this sentiment, but the question is what is there left to price?”

Tuesday sees euro zone consumer confidence and industrial sentiment data for September, with traders keen to see whether the region’s economic recovery has stalled or whether it is improving.

Elsewhere Italian bond yields edged slightly lower, with the 10-year at 0.88%, not far from last week’s low of 0.827%, which was an 11-month low.

Italian government bonds have been among the biggest beneficiaries from increasing investor confidence that a huge European Union recovery fund agreed in July and the ongoing ECB stimulus support will ease pressure on the region’s most-indebted members.

Other peripheral debt market yields were unchanged on Monday .

Another busy week for new bond issuance supply looms, with Germany, France, Spain and Italy all seeking to raise more funding.

Additional reporting by Abhinav Ramnarayan; Editing by Gareth Jones, Mark Potter and Hugh Lawson

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