UPDATE 2-Euro zone bonds hold ground, eyeing vaccinations, Fed

Adds details

By Yoruk Bahceli

AMSTERDAM, March 16 (Reuters) - Euro zone government bonds held ground on Tuesday, 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 has so been seen as 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.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 down about a basis point at -0.34% at 1228 GMT, far below the highest since March 2020 around -0.20% touched in late February. Most other 10-year yields were unchanged to a touch lower. 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

Italian bonds underperformed, with the 10-year yield up 2 basis points to 0.63%, raising the closely watched risk premium over German equivalents to 97 basis points. DE10IT10=RR

Elsewhere, France will raise 7 billion euros from the sale of its second green bond, which it is selling via a syndicate of banks, according to memos from three lead managers seen by Reuters showed.

And Greece hired a syndicate of banks for its first new 30-year bond sale since 2008. The deal will most likely launch on Wednesday as the debt management office said it would come "in the near future," a phrase usually used a day before a sale. nL8N2LE3LV

There was little reaction to Germany's ZEW economic research institute survey, which showed investor sentiment in Europe's leading economy increased more than expected in March.

A large majority of experts also expect inflation to continue rising, and higher long-term interest rates, ZEW said. nS8N2KV09L

(Reporting by Yoruk Bahceli, editing by Larry King and Ed Osmond)

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