LONDON: Eurozone bond yields dipped on Friday after poor German data and comments from a top ECB policymaker on further accommodation firmed bets the central bank will step up efforts to boost low inflation and growth next month.

German producer prices fell 2.4 percent in January from a year earlier, more than the 2 percent drop economists forecast in a Reuters poll, pulling yields back towards last week’s 9-1/2-month low.

While that was followed by a surprise uptick in US inflation that nudged up yields as it keeps further rate rises in the world’s largest economy on the cards, they came back after comments from ECB’s vice president Constancio.

Constancio said the ECB would aim to protect banks from unintended harm if it decides next month to ease policy, seen by some analysts as an endorsement of tiered rate policy similar to that recently adopted by Japan.

The speech comes a day after minutes from the European Central Bank’s January meeting showed concern that low inflation could become embedded, with some policymakers advocating pre-emptive action in the face of new threats.

Euro zone money markets fully price in a 10-basis-point cut in the ECB’s deposit rate to minus 0.40 percent at the ECB’s March 10 meeting. Another cut of 10 basis points is priced in for later in the year.

“The economic data we’ve been seeing and the minutes suggest the ECB will deliver in March,” said Patrick Jacq, Europe rate strategist at BNP Paribas. “Markets fully price in a 10-basis- point cut and are also starting to price in the chance of a 20- basis-point cut.”

While long-term inflation expectations in the euro zone have pulled back from record lows reached last week, they remain low.

The most widely followed measure of the market’s long-term inflation expectations for the euro zone - the five-year, five-year, breakeven forward - is at 1.44 percent and below the ECB’s inflation target of close to 2 percent.

Germany’s 10-year Bund yield fell 1 basis points to 0.20 percent, heading back towards last week’s 9 1/2-month low of 0.13 percent. Most euro zone equivalents fell by a similar amount.

Two-year yields were about 1 basis point lower at minus 0.52 percent and within sight of record lows set last week.

The yield gap between 10-year British government bonds and their German peers was about 120 basis points, close to its widest level in two weeks.—Reuters