Below forecast Ifo, ECB comments push German yields lower
* German business morale 17-month high but below forecast
* Fed, ECB send further dovish signals
* Euro zone bond yields fall broadly after Draghi flags LTRO
LONDON, Sept 24 (Reuters) - German government bond yields fell on Tuesday after a survey showed business sentiment was a little less robust than expected and as European Central Bank policymakers signalled monetary policy will remain loose.
Germany's Ifo measure of business morale hit its highest level in 17 months in September but the rise was not quite as much as forecast, stirring concerns that markets may have priced in a much faster recovery than they should have.
Central banks too have surprised markets with their softer tone in recent days. The U.S. Federal Reserve shocked investors last week by not trimming its massive stimulus programme.
ECB Governing Council member Ewald Nowotny said on Tuesday it was too early to end crisis measures and that long-term refinancing loans (LTROs) remained part of the bank's arsenal.
The comments came one day after ECB President Mario Draghi said the bank was ready to offer another round of cheap loans to banks to anchor money market rates.
Ten-year German Bund yields fell 6 basis points to 1.80 percent, while Bund futures rose to three-week highs of 139.60, before closing 76 ticks higher on the day at 139.54.
"The market definitely expected to get a better release of the Ifo ... and this created the premises for Bunds to retrace to a near-term 1.75-1.85 percent range," said Gianluca Ziglio, executive director of fixed income research at Sunrise Brokers.
"Another driver was yesterday's remarks by Mr. Draghi about the possibility of new liquidity injections, picked up by other (ECB) speakers today."
The ECB's signals strengthened euro zone bonds across the credit spectrum. Ten-year Italian yields fell 3 bps to 4.24 percent even as the head of the country's Treasury said 2014 debt issuance should roughly match this year's total.
Analysts said they did not see the comments as negative, despite Italy's need to cut debt levels of about 2 trillion euros, because they are unlikely to reflect major budget slippage.
Maria Cannata's remarks that she would look to conduct exchange transactions or buybacks next year to reduce the bulk of redemptions in 2015 suggested part of 2014 issuance plans represent pre-funding for the following year, they said.
"Any form of buy back is going to support the margin," one trader said.
Sunrise's Ziglio said the plans supported bets on a steeper Italian yield curve and recommended selling 10-year bonds and buying 2015 bonds.
Cannata also said Italy was mulling the launch of seven-year debt to tap increased appetite for the maturity. The country will sell zero-coupon and inflation-linked paper on Wednesday and conventional bonds on Friday.