* Key week for world bond markets
* Italy govt must present budget targets this week
* Fed to hike rates this week, ECB’s Draghi speaks Monday
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By Dhara Ranasinghe
LONDON, Sept 24 (Reuters) - Italian government bond yields rose on Monday, reflecting some unease among investors given this week’s deadline for the new government to present its budget targets.
Broader euro zone debt markets were also sidelined as central bank events approached. European Central Bank President Mario Draghi speaks at the European Parliament later on Monday, while the U.S. Federal Reserve is expected to raise interest rates again when it concludes a two-day meeting Wednesday.
In Italy, the chief economic advisor for the League, one of the two parties in the ruling coalition, said on Monday that a deficit target of 2.5 percent of gross domestic product in the 2019 budget, coupled with a policy to boost growth, would be acceptable for markets.
Claudio Borghi, also president of the lower house budget committee, repeated that Italy’s exit from the euro, which the League once called for, was “out of the question”.
“Those who have had a long position on BTPs have taken profit in recent days,” said BBVA strategist Jaime Costero Denche.
“However, the deficit numbers the government is talking about, 1.6-2.5 percent with no anti-European strategy, suggests the spread (over German bonds) will go back towards 200 bps.”
In early Monday trade, two-year Italian bond yields were up 4.5 basis points on the day at 0.81 percent. Ten-year yields were 3.5 bps higher at 2.87 percent.
The gap over benchmark German bonds yields widened from Friday’s close at around 241 bps.
Outside Italy, most euro zone bond yields were flat to a touch higher, pausing after a recent selloff sparked by expectations for higher interest rates from major central banks.
Germany’s 10-year bond yield was at 0.47 percent, holding below highs above 0.50 percent hit last week.
The ECB should speed up its exit from “crisis-mode” monetary policy, ECB policymaker Ewald Nowotny said on Sunday, reiterating his hawkish line about the timing of potential rate increases.
The U.S. Federal Reserve is expected to raise rates again this week and unease about further increases have helped push 10-year U.S. Treasury yields back above 3 percent.
“The rise in global bond yields is related to higher rates from central banks - not just the Fed or emerging markets such as Turkey,” said Frederik Ducrozet, senior economist Europe at Pictet Wealth Management.
“Around a third of global central banks are now hiking rates.” (Reporting by Dhara Ranasinghe, editing by Larry King)