Euro zone yields stay low on ECB stimulus expectations

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

LONDON, Nov 27 (Reuters) - German 10-year Bund yields traded near their lowest in three weeks in late Friday trade amid expectations of further monetary stimulus from the European Central Bank, while Portugal's 10-year government bond yields held close to zero.

The ECB signalled in October it would further ease its monetary policy in December, which has underpinned euro zone government bonds in recent weeks. The moves have been muted since bonds recovered from a sell-off on optimism around COVID-19 vaccines.

Dovish comments by ECB chief economist Philip Lane on Thursday regarding inflation and the minutes of the bank's October meeting added to expectations of more stimulus.

The benchmark German 10-year government bond yield was last unchanged at -0.58%, after touching its lowest in nearly three weeks at -0.595%.

Yields across other core markets and peripheral markets were also little changed. Portugal's 10-year government bond yield was slightly higher, last trading at 0.02%, after dropping as low as 0.007% the previous day.

Portugal's 10-year yield remained close to breaking into negative territory for the first time on Refinitiv, after it already doing so on Bloomberg and Tradeweb.

"I wouldn't be surprised if there's been a little bit of profit-taking from people that own the bonds," said Andy Cossor, rates strategist at DZ Bank in Frankfurt. "They've had a good run and coming into month-end, you're heading into the quietest month, December."

"I would say that fund managers are convinced that zero, or very close to it, is the floor for Portuguese yields," Cossor said.

Italy's 10-year BTP yield was flat at 0.56%. The premium it pays over German's 10-year yield was at 114 basis points, close to the lowest it's been since early 2018. The narrow spread between Italian and German yields "continues to point to the fact that Hungarian and Polish tub thumping is continuing to fall on deaf ears," said Lyn Graham-Taylor, fixed-income strategist at Rabobank. Poland and Hungary reiterated on Friday that they will block a new European Union budget and coronavirus recovery fund -- a factor that has helped drive Southern European borrowing costs to record lows -- if rule-of-law conditions are attached. Euro zone economic sentiment fell for the first time in seven months in November as a second COVID-19 wave struck the continent, depressing all sectors, particularly those hardest hit by lockdowns such as services and retail.

The numbers were, however, expected and a final reading of the already reported data, so it had little impact on euro zone yields.

(Additional reporting by Yoruk Bahceli, Editing by Timothy Heritage)