* Weak German data stall rise in bond yields
* Market pauses after biggest one-day jump since mid-January
* ECB minutes confirm it debated impact of low interest rates on banks
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Adds detail on ECB minutes, updates pricing)
By Dhara Ranasinghe and Virginia Furness
LONDON, April 4 (Reuters) - Germany’s benchmark 10-year bond yield held below zero percent on Thursday, as more signs of weakness in Europe’s biggest economy offset optimism about U.S.-China trade talks and a softer Brexit.
Confirmation from the ECB’s March minutes that policymakers debated the risk posed to banks by ultra-low interest rates also helped keep a lid on yields, although previous comments by ECB President Mario Draghi meant markets showed little reaction to their publication.
Draghi had already raised the prospect of even more stimulus, saying that a rate hike could be delayed further and that there could be help for banks to mitigate the side-effects of negative interest rates.
That prompted a strong rally in euro zone government bonds and saw Germany’s 10-year Bund yield, the benchmark for the region, fall well into negative territory.
Draghi’s comments came after sources told Reuters ECB staff was studying a tiered deposit rate to give banks some relief from having to pay a punitive charge for parking their cash at the central bank overnight.
The 10-year Bund remained in focus on Thursday after data showing German industrial orders fell unexpectedly in February, registering their biggest drop in more than two years.
Germany’s leading economic institutes, meanwhile, slashed their 2019 growth forecast for Europe’s biggest economy to 0.8 percent from 1.9 percent and warned growth could be much lower still if Britain quits the European Union with no agreement.
Germany’s 10-year Bund yield was minus 0.006 percent . It had jumped five basis points on Wednesday, its biggest one-day rise since mid-January.
“We had argued that negative 10-year Bund yields could only be rationalised by extreme angst,” said Benjamin Schroeder, ING’s senior rates strategist. “Some of that angst has been lifted over the course of the past few days by a slew of positive headlines leaving the 10-year Bund yield around zero again.”
After notching up its biggest monthly declines in almost three years in March, the 10-year yield had risen at the start of April as global economic data improved and U.S.-China trade negotiations appeared to be making headway.
Most euro zone bond yields were lower on the day .
In addition to optimism about the state of discussions between the world’s two biggest economies on trade, hopes of a softer British exit from the European Union have weakened the appeal of safe-haven assets.
The lower house of the British parliament on Wednesday approved legislation which would force Prime Minister Theresa May to seek a Brexit delay to prevent a departure on April 12 without a deal.
“Markets are reacting more to the more positive news on Brexit, and if we do see some conclusion here, that would be bearish for bond yields,” said Pooja Kumra, European rates strategist at TD Securities in London. “But we are in mixed ground because we have poor data and the focus on Brexit.”
Italian bond yields jumped on reports of cuts to Italy’s growth forecasts. Reuters reported on Wednesday that Rome was likely to cut its 2019 growth estimate this month to 0.3 percent or 0.4 percent.
Reporting by Dhara Ranasinghe; Editing by Catherine Evans