Euro zone bonds hold ground, eyeing vaccinations, Fed

By Yoruk Bahceli

AMSTERDAM, March 16 (Reuters) - Euro zone government bonds held ground in early Tuesday trade, as caution set in before a U.S. Federal Reserve meeting and uncertainty around vaccinations in the bloc supported safe-haven assets.

Wednesday's Fed meeting is in focus amid expectations that economic growth and inflation will rebound after U.S. fiscal stimulus, which has pushed up government bond yields across the world in recent weeks. The Fed so far has been downplaying those concerns.

Safe-haven euro zone government bonds were also supported by concerns around the bloc's vaccination efforts -- which already lag the U.S. and Britain -- after Europe's largest economies temporarily halted the use of AstraZeneca's AZN.L vaccine on Monday nL1N2LD0O2

The vaccine currently encompasses around 25% of the vaccines distributed across the European Union, and 15% of those so far administered, according to Mizuho analysts.

Uncertainty around the AstraZeneca vaccine rollout "adds to the general theme that the Eurozone is lagging behind in the recovery from the pandemic," ING analysts told clients.

On Tuesday, Germany's 10-year yield, the benchmark for the euro area, was unchanged at -0.34% at 0829 GMT, below the highest since March 2020 around -0.20% touched in late February. Bond yields move inversely with prices.

The gap between 10-year German and U.S. Treasury yields -- an indicator that reflects the divergence between safe-haven assets in the euro area and the United States -- remains just shy of its highest since February 2020, as U.S. yields have continued to rise this month while German Bund yields have fallen. DE10US10=RR

In the primary market, France started the sale of its second green bond via a syndicate of banks. L8N2LE21C

UniCredit analysts expect France to raise around 8 billion euros from the deal, more than the 7 billion euros it raised when it issued its first green bond in 2017, given higher borrowing needs due to the pandemic and the popularity of environmentally friendly assets.

Elsewhere, Germany and Finland will re-open existing bonds via auction.

(Reporting by Yoruk Bahceli, editing by Larry King)

((Yoruk.Bahceli@thomsonreuters.com; +44 20 7542 7571; Reuters Messaging: yoruk.bahceli@thomsonreuters.com))