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Germany's Bund yield touches 2-month high as vaccine hopes dent safe-havens

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

LONDON, Nov 11 (Reuters) - Germany’s 10-year government bond yield rose to a two-month high on Wednesday as this week’s positive news on a COVID-19 vaccine continued to boost expectations for a brighter economic outlook ahead and weigh on demand for safe-haven debt.

European Central Bank President Christine Lagarde is expected to speak at an ECB forum on central banking later this session. Her comments not expected to alter expectations for further stimulus at the ECB’s December meeting.

The general risk-on sentiment in financial markets following news on Monday that Pfizer’s experimental COVID-19 vaccine is more than 90% effective based on initial trial results continued to drive bonds.

While still early days, the vaccine could be a potential game-changer for a world economy hit hard by the coronavirus. That prospect hurt German bonds, considered one of the safest assets in the world.

The 10-year German Bund yield rose to -0.456% in early trade, its highest level in two months. It has risen almost 14 basis points so far this week and is on track for its biggest weekly jump since early June.

Bond yields were slightly higher across the euro area. U.S. bond markets were closed for Veterans Day.

Italy’s 10-year bond yield was almost 2 bps higher on the day at 0.74%, moving away from record lows hit briefly on Monday before the Pfzier vaccine news broke.

Still, analysts say room for further selling in euro zone bond markets is limited given expectations for further ECB stimulus and a still weak inflation outlook.

“The scope for a further rise in yields is limited by a couple of factors. One is policy - we don’t expect a central bank response to better growth conditions until inflation rises,” said Timothy Graf, head of macro strategy for EMEA at State Street Global Markets. (Reporting by Dhara Ranasinghe; Editing by Angus MacSwan)

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