September 13, 2018 / 7:13 AM / a year ago

Euro zone bond markets pause before ECB, Italy to hold bond sale

* ECB, BOE to hold meetings

* ECB may firm up plans to taper purchases from Oct

* Italy to sell up to 7.75 bln euros of bonds

* Euro zone periphery govt bond yields

By Dhara Ranasinghe

LONDON, Sept 13 (Reuters) - Most euro zone government bond yields were little changed on Thursday, with the market largely sidelined ahead of a European Central Bank meeting.

Italy’s debt market was the outlier, with yields there rising ahead of a sale of up to 7.75 billion euros of bonds.

The ECB is expected to keep policy unchanged, making only nuanced tweaks to its guidance to stay on course to end its 2.6 trillion euro stimulus this year and raise interest rates next autumn.

At the same time, slight downward revisions to economic growth forecasts are anticipated following a string of weak figures over the summer months.

ECB chief Mario Draghi may also be pressed for clarity on the timing of a rate hike and for more details on the bank’s plans to reinvest funds from maturing bonds it holds under quantitative easing.

“Our sense is that we will get a dovish press conference from Draghi,” said Dean Turner, an economist at UBS Wealth Management in London.

“The economy is doing fine and inflation is printing at or around target - but the immediate concern for us is that Italy continues to make headlines, as does Brexit, and trade.”

Money market pricing suggests investors anticipate the first ECB rate hike since 2011 to come just over a year from now .

Yields on higher-rated euro zone bonds were flat in early trade . Germany’s Bund yield, for instance, was steady at around 0.41 percent — below five-week highs hit earlier this week at 0.44 percent.

The ECB will announce its policy decision at 1145 GMT, followed by Draghi’s news conference at 1230 GMT. The Bank of England also meets on Thursday.

BBVA strategist Jaime Costero Denche said bond investors would be looking for the ECB to give more details on how it plans to reinvest funds from maturing bonds and in particular, how long it will make reinvestments, and how much flexibility it will allow in terms of timing and geographic location.

“No new details on forward guidance are likely today so the focus is likely to be on the reinvestment strategy and this is key,” he said.

Elsewhere, Italian bond yields continued their rise a day after signs of tension within the governing coalition in Rome over the 2019 budget resurfaced.

Yields were 2-3 basis points higher across the Italian curve , also facing upward pressure from anticipated new supply.

Italy’s Treasury will sell three, seven and 30-year government bonds or BTPs in what could be another test of investor sentiment towards one of the euro zone’s biggest bond markets.

Reporting by Dhara Ranasinghe Editing by Keith Weir

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