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Euro zone bond yields fall ahead of Fed's Powell speech

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr

LONDON, Aug 27 (Reuters) - Borrowing costs across the euro area fell on Thursday, ahead of a key speech by U.S. Federal Reserve Chair Jerome Powell that is expected to set out the central bank’s new strategy for meeting its price stability and maximum employment goals.

World bond markets have sold off in the past three days, with German and U.S. Treasury yields rising to 1-1/2 week highs as anticipated new bond supply, hopes for a coronavirus treatment and some nervousness ahead of Powell’s speech all weighed.

Bond supply in the euro area has started to pick up after a summer lull, but with no big auctions scheduled for Thursday, yields across the single currency bloc headed lower.

Germany’s benchmark 10-year Bund yield fell 3 basis points to -0.44% -- down from a 1-1/2 week high hit the previous session at around -0.39%.

Italian bond yields were also broadly lower, with 10-year yields down around 2 bps at 1.07% and below this week’s thee-week highs.

Market attention was firmly fixed on Fed chief Powell, due to speak virtually at the Jackson Hole symposium at 9:10 a.m. EDT (1310 GMT).

Powell is expected to discuss the results of the Fed’s framework review to explore how monetary policy should be adapted for a low interest rate environment.

The Fed chief may lay out a case for why higher inflation over the long term may be positive for the economy.

“We think the Fed’s message is clear: it will want to keep rates low across the yield curve, in line with its desire to keep financial conditions ultra-loose until its policy objectives have been met,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

Commerzbank analysts said the Fed seems poised to move to an average inflation targeting framework, which allows for overshooting after a period of low inflation.

European Central Bank chief economist Philip Lane is also scheduled to speak later in the session. (Reporting by Dhara Ranasinghe Editing by Raissa Kasolowsky)

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