* Bonds rally across credit spectrum, led by peripherals * Article an excuse to buy back into cheapened markets * Markets to remain on edge before Fed meets next week By Ana Nicolaci da Costa LONDON, June 14 (Reuters) - Euro zone bonds rallied across the credit spectrum on Friday after sharp losses in recent weeks, as market opinion swayed away from the idea that the U.S. Federal Reserve is likely to scale back monetary stimulus soon. Investors had been looking for an excuse to buy back into cheapened markets, analysts said, and a newspaper article provided one. The Wall Street Journal said an adjustment in the Fed's bond-buying programme did not mean the U.S. central bank would end it "all at once" or that the Fed was "anywhere near raising short-term interest rates". "The market was looking for a new reason to come back on the buying side," said Cyril Regnat, fixed income strategist at Natixis. "The sell-off has been really massive and with some mixed data in the U.S., maybe investors were waiting for some kind of signal." With nerves heightened ahead of a Fed policy meeting next week, some said investors were unwinding their positions after an "excessive" sell-off prompted by Fed Chairman Ben Bernanke. Bernanke told Congress in May that a decision to scale back the $85 billion in bonds the Fed is buying each month could come at one of the central bank's "next few meetings" if the economy looked set to maintain momentum. Friday's rally was led by riskier euro zone debt, with Spanish government bond yields falling 8 basis points to 4.54 percent and the Italian equivalent falling 8.6 bps to 4.28 percent, having both risen last month. Debt issued by bailed-out Portugal climbed even more sharply, with 10-year yields falling 19 bps to 6.35 percent. Yields on higher-rated euro zone debt also fell. "It's just a bounce from a very aggressive (sell-off)," one trader said. FED OUTLOOK Financial markets have been choppy in recent weeks, with trade dominated by views on the timing of a possible Fed exit from ultra-loose monetary policy, making European assets more sensitive than usual to U.S. data releases. Industrial output and producer price data for May due later on Friday will provide fresh clues to the health of the world's largest economy. Figures on Thursday showed U.S. retail sales rose more than expected in May and first-time applications for unemployment benefits fell last week. Against the backdrop of mixed U.S. data, Commerzbank said in a research note the Fed should remain on hold and confirm its bond purchasing programme without any cuts next week. "The market's discussion on Fed policy has been completely and utterly irrational, so divorced from the actual facts of what the Fed has said," Marc Ostwald, strategist at Monument Securities said. "That article basically has calmed nerves temporarily ... in principle what it does is encourage people to reach for a bit more yield." German Bunds also rallied. Bund futures rose 52 ticks to 143.71, having hit its lowest since mid-February earlier in the week at 142.02.