* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
LONDON, Feb 2 (Reuters) - Core euro zone government bond yields rose in early trading on Tuesday, edging up by a couple of basis points, as global market sentiment remained upbeat about U.S. fiscal stimulus.
After Asian shares rose overnight, European equity indexes opened higher, with market participants optimistic before negotiations between U.S. President Joe Biden and Republican senators on a new COVID-19 support bill.
“The tone in global market strikes as us as more upbeat than last week,” wrote ING rates strategists in a note to clients. “The focus on US fiscal stimulus could add upside to global yields, and help resume the USD-EUR rates widening trend.”
The benchmark German 10-year Bund yield was up around two basis points at -0.4980% at 0817 GMT, having risen by around 6 bps in the past seven days.
The spread between the German benchmark yield and the 10-year U.S. Treasury yield was at 159 basis points .
In Italy, talks aimed at reviving the collapsed ruling coalition were stuck on policy issues, political sources said.
Riskier Italian bonds yields edged higher, with the 10-year up around 1 basis point at 0.636%.
Data on Monday showed that the European Central Bank kept its purchases of Italian government bonds steady in the last two months, even as the country went through a political crisis that briefly pushed up its borrowing costs.
ECB bond-buying under the Pandemic Emergency Purchase Programme (PEPP) was lower than it was the week before.
“The reduction in the pace of purchases is perhaps not surprising when one considers that the ECB is simply aiming to maintain low rates and spreads, rather than to push them even lower,” wrote the ING strategists.
“Provided the ECB remains credible in enforcing favourable financing conditions, something that is much more easily achieved for sovereign bond markets than for household credit for instance, then private investors might be happy to continue buying long-dated syndicated deals,” they said.
Elsewhere, preliminary French inflation data showed a 0.8% increase year-on-year in January, higher than a forecast of 0.4%.
Italy’s fourth-quarter gross domestic product is due at 0900 GMT and euro zone fourth-quarter GDP at 1000 GMT.
“Evidence suggests that the euro area economy may have begun to adapt to the effects of lockdown with increased online shopping and better-targeted lockdown measures, meaning that the Q4 lockdowns likely had a smaller impact than previously thought,” wrote RBC Capital Markets strategists in a note. (Reporting by Elizabeth Howcroft, editing by Larry King)