Euro zone bond yields tumble as risk sentiment picks up

* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr

By Yoruk Bahceli

LONDON, March 20 (Reuters) - Euro zone bond yields tumbled in early trade as risk sentiment picked up to support Southern European bonds, while German bonds retraced some of their losses from the previous session.

Asian shares recovered somewhat on Friday following this week's rout. European shares were set for similar gains as more countries took monetary and fiscal measures to cushion the economic impact of the coronavirus.

Norway's central bank became the latest to cut rates while China was set to unleash trillions of yuan of fiscal stimulus to revive its economy.

Italian bond yields tumbled with the 10-year yield down 28 bps to 1.54%, set for a second day of recovery after falling nearly 50 bps on Thursday.

The European Central Bank's 750 million-euro emergency bond purchase scheme, announced on Wednesday, has boosted Southern European debt, alleviating some concern over how already heavily-indebted states would finance the fiscal measures needed to defend against coronavirus.

Spanish and Portuguese yields also fell, with 10-year yields down around 15 bps each .

"I think there's a bit more positive risk sentiment," said Mizuho strategist Peter McCallum.

"People are reflecting what happened in Asia and looking towards a slightly more positive session now that we've had the ECB catching up with other central banks, central banks introducing more measures and fiscal (stimulus) coming in."

German Bunds - a safe haven that would sell off when risk sentiment picked up in normal times - also rallied.

10-year yields slid 14 bps to -0.31%, after touching over 10-month highs on Thursday at -0.14%.

Mizuho's McCallum said this was a relatively modest move reversing some of Thursday's sell-off, when the yield hit over 10-month highs after Germany said it would declare an exception to its debt rules to finance stimulus measures.

Bunds have also been under pressure this week as investors sold safe-haven assets in recent days to make up for losses elsewhere.

10-year bond yields are up nearly 30 bps this week, set for their worst week since June 2015.

(Reporting by Yoruk Bahceli, editing by Larry King)