Euro zone bonds calm down as markets look to Powell

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

By Yoruk Bahceli

AMSTERDAM, March 4 (Reuters) - Euro zone bond yields dipped on Thursday after a global bond sell-off a day earlier that spooked markets, with focus on a speech from Federal Reserve Chairman Jerome Powell due later in the day.

Bets that U.S. stimulus would boost inflation and growth pushed government bonds worldwide to their worst performance in years in February. Central banks so far have appeared relatively sanguine about the rise in bond yields.

Yields are down from their highs this week, but pressure remains. U.S. Treasury yields rose on Wednesday, alongside euro area government bond yields and UK gilts, pushing stock markets and other low-yielding safe assets lower on Thursday.

On Thursday, Germany's 10-year yield was down 2 basis points to -0.31% at 0808 GMT after rising 5 basis points on Wednesday, still moving in tandem with U.S. Treasuries, where yields fell similarly.

Italian bond yields also fell, keeping the gap between 10-year Italian and German yields largely unchanged around 103 bps.

Focus on Thursday is on a speech by the Fed's Powell, who investors will watch for any hints of concern about the recent jump in bond yields.

Mikael Olai Milhoj, senior analyst at Danske Bank, noted that inflation expectations moved higher together with inflation-adjusted "real" bond yields on Wednesday, a move he said would be more acceptable from the Fed's perspective.

Such a move implies that the rise in yields is driven by expectations of a pick-up in inflation, a positive signal for economic recovery from the pandemic, rather than an unwarranted tightening in financial conditions.

"We will still listen closely for any possible verbal intervention from the Fed if they start to think (in particular real) rates have moved too high," Milhoj told clients.

In Europe, the ECB has been under scrutiny after last week's bond-buying data did not show a pick-up in net or gross purchases, and some policymakers played down concerns around rising bond yields.

Focus is on longer-dated supply -- up to 30 years from France and 15 years from Spain -- via auctions. Those may put pressure on euro area bonds. Longer-dated supply is higher in sensitivity to rate changes. (Reporting by Yoruk Bahceli, editing by Larry King)