German yields come off one-week highs as European stock fall

* Euro zone periphery govt bond yields (recasts lead, updates prices, adds background on EU, Italy)

By Yoruk Bahceli

AMSTERDAM, Oct 21 (Reuters) - German 10-year bond yields touched their highest in a week in early trade on U.S. stimulus hopes, but demand for the safe-haven assets reversed as European stock markets fell back into the red and were set for a straight third session of losses.

The White House and congressional Democrats kept up negotiations on Wednesday on a new coronavirus relief bill, though their effort faced opposition in the Republican-controlled Senate, where conservatives object to the trillion-dollar-plus price tag.

The uncertainty and the resurgent coronavirus pandemic in Europe dented risk appetite across the continent with the pan-European index STOXX 600 losing 1.1% about 20 minutes ahead of the close.

The risk-off sentiment pulled down 10-year Bund yields from the one-week highs they hit in early trade at -0.568%. They stood at 0.5950% at 1504 GMT.

Focus was also on the European Union's bonds on Wednesday.

The 17 billion euros of bonds the EU issued to record demand of 233 billion euros on Tuesday, kicking off the funding of its SURE unemployment scheme, rallied sharply in the secondary market on Wednesday.

Analysts said the secondary performance signalled more confidence in the EU's funding programme.

"As we saw with the offers, they could have completed their (SURE) funding yesterday," said Richard McGuire, head of rates strategy at Rabobank, referring to the up to 100 billion euro scheme.

The European Union decided earlier this week to set up a debt management office unit to manage its hefty bond issuance, an EU official said on Wednesday.

Some attention was also on Italy, which said that bond issuance in coming months would be down more than 30% compared to last year, given the amount of liquidity it has to hand.

Italy's Treasury also said on Wednesday it would offer a new 30-year BTP bond due on Sept. 1, 2051 in a syndicated exchange for five bonds expiring in 2021, 2023 and 2025.

Rome is also finalising the framework for its first green bond but it has yet to decide if that will be sold this year or at the beginning of 2021.

In the primary market, Greece received 14 billion euros of demand for a 15-year bond via a syndicate of banks, according to a lead manager notice seen by Reuters. (Reporting by Yoruk Bahceli; additional reporting by Julien Ponthus; editing by Angus MacSwan)

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