* Bund yields rise further after biggest daily jump
* All other euro zone bond yields rise
* QE widely expected but size, scale crucial
* Greek exclusion could roil fragile market
By John Geddie
LONDON, Jan 22 (Reuters) - Investors reduced exposure to euro zone sovereign debt on Thursday as markets waited nervously to hear if new European Central Bank stimulus would live up to their sky-high expectations.
After the biggest daily jump in more than a year on Wednesday, German yields - the bloc’s benchmark - climbed further, while yields on other euro zone countries’ debt pulled away from historic lows.
Market watchers are convinced the ECB will announce a sovereign bond-buying quantitative easing scheme at its press conference at 1330 GMT, following the path of other major central banks such as the U.S. Federal Reserve and the Bank of England.
But with ECB President Mario Draghi likely to offer some compromise to the hawkish, northern European members of his council, the scale and structure of QE is still up in the air. Traders said this led some investors to book profits on a three-year rally.
“Whether the press conference ends in a sea of tears ... will probably ultimately depend on the details of the programme,” said DZ Bank strategist Christian Lenk.
German 10-year yields rose 3 basis points to 0.50 percent, pulling away from lows of 0.38 percent hit on Tuesday.
Italian and Spanish equivalents - the largest economies in the bloc’s indebted south - also inched away from historic lows, both up 2 bps at 1.72 and 1.56 percent, respectively.
Analysts said higher-yielding debt has greater potential to perform under QE, as borrowing costs across the bloc converge.
But traders said hints around QE had already squeezed a lot of the value out of these assets, despite being coupled with an oil-induced inflation slump. This struck a note of caution among investors, many of whom waited on the sidelines to see exactly what the ECB would deliver.
A euro zone source said on Wednesday that the ECB’s Executive Board, which met on Tuesday, has proposed that the bank should buy 50 billion euros ($58 billion) in bonds per month starting from March.
Uncertainty surrounds the proposed programme’s duration, however. The Wall Street Journal reported it would last a minimum of one year while Bloomberg said the purchases would run until the end of 2016. The ECB declined to comment on any of the reports.
The duration is significant. A programme starting in March and running for a year would total about 600 billion euros. If it ran until the end of 2016, it could surpass 1 trillion euros.
“Woe betide the ECB if it disappoints expectations,” said Rabobank in a note, quoting Roman poet Horace who wrote, “Once a word has been allowed to escape, it cannot be recalled.”
There are also questions about whether the scheme will include Greece, which looks set to elect a left-leaning government on Sunday that has been campaigning for debt relief and an end to austerity.
The main ratings agencies said any exclusion of Greek debt would be bad news for the country’s recently upgraded credit rating.
Greek borrowing costs edged up a fraction on Thursday, with yields on shorter-dated bonds remaining sharply above longer-dated equivalents - a sign that investors fear the country could be on the verge of default. (Editing by Susan Fenton)