* Euro zone yields 2-4 bps higher on day
* Focus back on economic outlook and ECB after French election
* Auctions from Netherlands, Austria also weigh
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By Dhara Ranasinghe
LONDON, May 9 (Reuters) - Borrowing costs across the euro area rose on Tuesday as the decisive outcome to France’s presidential election allowed investors to move on to the prospects for a scaling back of ECB monetary stimulus.
Bond supply from the Netherlands, Austria and Germany later in the day put some upward pressure on bond yields.
But the key driver for higher yields across the bloc was a perception that fading political risks in France after Sunday’s win for centrist Emmanuel Macron could pave the way for the European Central Bank to step back from its ultra-loose monetary policy.
Data on Tuesday showed German industrial production fell by less than expected in March and trade proved resilient, supporting expectations for a robust performance of Europe’s biggest economy in the first quarter.
On Monday, ECB board member Yves Mersch said the central bank is close to replacing its negative view with a neutral one on whether the euro zone economy will reach growth targets, and should adjust its policy guidance accordingly.
“The political issues which were very much in focus are gone for now and the focus is back to the macro outlook,” said DZ Bank analyst Daniel Lenz.
German two-year government bond yields briefly rose to minus 0.64 percent, their highest level since the end of January, while benchmark 10-year Bund yields were 2 basis points higher on the day at 0.44 percent -- hovering close to six-week highs hit on Monday.
Dutch 10-year bond yields rose to six-week highs around 0.49 percent. Southern European bond yields, seen as most vulnerable to a removal of central bank stimulus, were 3-4 basis points higher on the day.
Societe General analysts said they expect the ECB to say in June that the balance of risks has shifted to neutral, opening the door to an announcement on tapering the bond-buying stimulus programme in September.
“The forward guidance is now turning conditional, a shift that we think particularly exposes the belly of the curve,” they said in a note, referring to medium-term yields.
That could provide a more challenging backdrop for bond sales in the euro area.
Later on Tuesday, the Netherlands sells 2-3 billion euro of five-year bonds, while Austria is scheduled to auction 1.1 billion euros of long-dated debt. Germany also comes to the market with a sale of inflation-linked bonds.
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Editing by Jeremy Gaunt