* Bund yields rise further after biggest daily jump
* Spain, Italy yields dip ahead of ECB meeting
* QE widely expected but size, structure crucial
* Greek exclusion could roil fragile market (Updates prices, adds comment)
By John Geddie
LONDON, Jan 22 (Reuters) - German 10-year bond yields rose on Thursday, as investors weighed up whether a 16-month rally in the top-rated debt can continue after the ECB launches a much-anticipated bond-buying scheme.
After the biggest daily jump in more than a year on Wednesday, German yields -- the bloc’s benchmark -- climbed further away from historic lows, as markets waited eagerly for confirmation that the ECB would follow the path of other major central banks into quantitative easing.
Lower-rated debt in the bloc’s southern periphery outperformed the German benchmark, as investors predicted their high yields would converge further under QE.
German 10-year yields rose 4 basis points to 0.50 percent, off lows of 0.38 percent hit on Tuesday, while Italian and Spanish equivalents dipped 1 bps to 1.69 and 1.54 percent, respectively.
“Certainly our bias is that we like peripheral debt so any weakness in peripheral debt could be a buying opportunity,” said Nick Gartside, chief investment officer at JP Morgan Asset Management.
German yields have fallen from peaks of over 4.5 percent in 2008, with the latest downward push starting in September 2013.
Some analysts predict that German yields will start to rise further as QE boosts rock-bottom inflation expectations, while others say even large-scale bond buying will struggle to offset the drag of low oil prices.
It is the size and structure of QE that is now the focus of attention, with European Central Bank President Mario Draghi likely to offer some compromise to the hawkish, northern European members of his council. The press conference starts at 1330 GMT.
“Whether the press conference ends in a sea of tears ... will probably ultimately depend on the details of the programme,” said DZ Bank strategist Christian Lenk.
A euro zone source said on Wednesday that the ECB’s Executive Board, which met on Tuesday, has proposed the bank should buy 50 billion euros ($58 billion) in bonds per month starting from March.
Uncertainty surrounds the proposed programme’s duration, however. The Wall Street Journal reported it would last a minimum of one year while Bloomberg said the purchases would run until the end of 2016. The ECB declined to comment on any of the reports.
The duration is significant. A programme starting in March and running for a year would total about 600 billion euros. If it ran until the end of 2016, it could surpass 1 trillion euros.
“Woe betide the ECB if it disappoints expectations,” said Rabobank in a note, quoting Roman poet Horace who wrote, “Once a word has been allowed to escape, it cannot be recalled.”
There are also questions about whether the scheme will include Greece, which looks set to elect a left-leaning government on Sunday that has been campaigning for debt relief and an end to austerity.
The main ratings agencies said any exclusion of Greece’s debt could hurt its recently upgraded credit rating.
Greek borrowing costs inched down a fraction on Thursday, but yields on shorter-dated bonds remain sharply above longer-dated equivalents -- a sign that investors fear the country could be on the verge of default. (Editing by Susan Fenton/Ruth Pitchford)