* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr
By Dhara Ranasinghe
LONDON, Feb 13 (Reuters) - Euro zone government bond yields fell on Thursday, as investors flocked back to safe-haven debt markets after the Chinese province at the epicentre of the coronavirus outbreak reported a record rise in the death toll under a new diagnostic method.
The new methodology effectively lowers the bar for classifying new infections, contributing to the spike in cases.
World stocks slipped, 10-year U.S. Treasury yields tumbled 5 basis points to 1.58% and the euro hit its lowest level against the Swiss franc since August 2015 as the latest developments fuelled concern about global growth.
That set the tone for European bond markets, with yields on top-rated 10-year German Bund yields falling 3 bps to -0.40% .
Yields on 10-year bonds across the euro zone were 1 to 3 bps lower on the day .
Concern that the spread of coronavirus will hurt the euro zone economy has weighed on inflation expectations and fuelled speculation that the European Central Bank, which cut rates in September, will have to ease monetary policy again this year.
Investor morale in the euro zone fell for the first time in four months in February over fears that China will not be able to contain the coronavirus outbreak, a survey showed on Monday.
Citigroup's economic-surprise index for Europe has slumped to a four-month low and a sense that the U.S. economy will prove more resilient than the euro zone's in the face of coronavirus has hurt the euro.
The five-year, five-year breakeven forward - a gauge of the market's long-term euro zone inflation expectations - has fallen around 6 bps in the past week to near its lowest levels since early December.
"With macro optimism fading, the adjustment of euro breakevens with the surprise decline in survey-based measures... continues - and it probably has further to go," said Michael Leister, head of rates strategy at Commerzbank in Frankfurt.
Yields in southern Europe were also lower, suggesting investors still preferred bonds that offered a positive yield rather than just the safest bonds, such as Germany's, that are deep in negative yield territory.
Greece's 10-year bond yield fell below 1% for the first time on Wednesday and held below that level in early Thursday trade.
(Reporting by Dhara Ranasinghe, editing by Larry King)