LONDON, Sept 4 (Reuters) - Euro zone bond yields fell further on Friday following a strong signal from the European Central Bank that it is willing to take further steps to shore up the currency bloc's economy.
The ECB's dovish message on Thursday outweighed any jitters over a U.S. jobs report later in the day that could determine whether the Federal Reserve raises interest rates this month or waits until December.
While the Fed has so far indicated that it is likely to raise interest rates this year, the ECB and China's central bank - where growth concerns are exacerbating a commodity rout - are tilting towards more easing.
The ECB cut its growth and inflation forecasts on Thursday, warning of possible further fallout from China and paving the way for an expansion of its already massive 1 trillion-euro plus asset-buying programme. ECB President Mario Draghi also said explicitly the bond-buying programme may run beyond September 2016 and the bank may adjust its size and composition.
German 10-year yields, the euro zone benchmark, were 3 basis points lower at 0.706 percent, their lowest level in nearly a week after falling as much as 6 bps on Thursday and reversing Monday's sharp rise. Yields on other euro zone bonds except for Greece were down 2-3 basis points.
"Fundamentally market reaction to U.S. data can be short-lived. In the medium-term perspective ECB QE matters more than U.S. non-farm payrolls so we think the bias is bullish for (German) Bunds," said BNP Paribas strategist Patrick Jacq.
Recent turmoil in financial markets triggered by fears of slowing growth in China, the world's second largest economy, have raised speculation the Fed may not raise rates this year.
A strong U.S. jobs number, however, could rekindle speculation of a hike as soon as this month, which could hurt riskier assets.
Economists polled by Reuters expect the U.S. economy to have produced 220,000 new non-farm jobs last month, continuing the robust employment creation of the past five years, while average hourly earnings are predicted to have risen by a modest 0.2 percent, as they did in July. (ECONUS]
"Further vigorous job growth could put the monetary custodians under pressure to take action, but we think the hurdle here is still very high at the moment," DZ Bank strategists said in a note.
"For the time being, the rate of job growth we are looking for -- 230,000 -- is hardly likely to be sufficient to outdo the flagging economy and low inflationary pressures." (Editing by Toby Chopra)