Euro zone yields steady, U.S. stimulus offsets ECB expected easing

* Euro zone periphery govt bond yields

MILAN, Dec 2 (Reuters) - Euro zone government bond yields held steady on Wednesday, boosted by hopes of a quick approval of a coronavirus stimulus plan in the United States, while expectations of more easing by the ECB was capping possible gains.

Top Senate Republican Mitch McConnell said on Tuesday the U.S. Congress should include a fresh wave of stimulus in a must-pass $1.4 trillion spending bill aimed at heading off a government shutdown.

U.S. Treasury yields surged on Tuesday, propelled by the new push in Congress to send federal aid to businesses and state and local governments hit by the pandemic.

ECB Board member Philip Lane is due to speak as part of the Thomson Reuters Global Investment Summit at 1400 GMT, ahead of the Dec. 10 ECB policy meeting, which is expected to increase and extend its Pandemic Emergency Purchase Programme (PEPP).

“Yesterday’s price action is a reminder of how a U.S. Treasuries sell-off could tighten financing conditions for Europe,” Citi told customers.

“PEPP is likely to respond to cap euro yields, but it is worth remembering that ECB QE normally breaks over year-end, perhaps opening up a small window of vulnerability.”

German 10-year government bond yields were at -0.525%, not far from a 3-week high.

The spread between U.S. Treasuries and Bund yields is down 0.5 basis points to 144.8.

“The broad sell-off across Treasuries and Bunds amid struggling spreads underscores the tricky interaction of positioning and swings in sentiment heading into year-end,” Commerzbank told customers.

Italian 10-year government bond yield was down 1 basis point at 0.631%. (Reporting by Stefano Rebaudo; Editing by Alison Williams)