UPDATE 2-Euro zone bond yields drift higher as ECB meeting looms

* Yields drift up but trade subdued before Thursday’s ECB

* G7 reach historic tax agreement

* German election in focus after regional weekend vote

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Adds comment, updates prices)

LONDON, June 7 (Reuters) – Euro zone government bond yields nudged up from one-month lows on Monday but trade was largely subdued as a European Central Bank meeting loomed.

Borrowing costs fell on Friday after a closely-watched U.S. jobs report fell short of expectations, calming worries that a roaring economy could lead the Federal Reserve to soon taper its stimulus.

Yields nudged back up on Monday alongside U.S. peers, with analysts noting weekend comments from U.S. Treasury Secretary Janet Yellen that higher interest rates could be a “plus”.

Germany’s 10-year Bund yield was last up 1.5 basis points at -0.20, keeping near roughly one-month lows hit after Friday’s U.S. jobs data.

Most other 10-year bond yields in the currency bloc were 1-2 bps higher on the day with direction seen limited ahead of Thursday’s ECB meeting.

The central bank will review the pace of emergency bond buys that it jacked up in March to prevent a rise in borrowing costs hurting a recovery.

Dovish rhetoric from the ECB suggests no hurry to slow the pace of buying under the 1.85 trillion euro ($2.24 trillion) Pandemic Emergency Purchase Programme (PEPP). Latest data from ECB showed money printing had in fact accelerated.

Yet with the economy on a sounder footing, inflation picking up and other central banks taking tentative steps to slow stimulus, pressure to taper is building.

“The risk is that the ECB comes across as too hawkish and we get a back-up in yields that we saw a few weeks ago,” said Andreas Billmeier, European economist, at Western Asset. He said the ECB could flag a potential slowdown in bond buying in August, when supply of government bonds typically slows.

“The ECB’s macro projections are also important because they have to reflect higher inflation but we are certain that the projections further out will show no dramatic change,” Billmeier said.

Irish and Dutch bond markets showed little immediate reaction to a historic deal from the G7 group of wealthy nations to back a minimum global corporate tax rate of at least 15%.

Low-tax jurisdictions like Ireland, Luxembourg and the Netherlands potentially stand to lose out from such an agreement.

Germany was in focus after Chancellor Angela Merkel’s conservatives won a resounding victory in a state election in eastern Germany on Sunday.

That was seen as a boost to Armin Laschet, who hopes to succeed her in September’s national election.

“The results of Sunday’s election in Saxony-Anhalt once again illustrate that, even if there was any, the wind of change in German politics is currently very mild,” said ING’s global head of macro Carsten Brzeski.

Elsewhere, Italy’s 10-year bond yield briefly hit a one-month low at 0.869%, before moving higher.

Fitch on Friday confirmed Italy’s rating at BBB- with a stable outlook.

Italy’s 5-Star Movement will maintain support for the national unity government led by Mario Draghi despite the unpopularity of some of its decisions, former premier Giuseppe Conte, the most likely new leader of the party, meanwhile said on Monday.

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