* ECB bought more Italian debt than supposed to in July
* Central bank bond-buying supports BTPs
* BTP/Bund spread holds close to 2017 lows
* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr
LONDON, Aug 8 (Reuters) - The premium investors are willing to pay to hold Italian government bonds over top-rated German ones held close to 2017 lows on Tuesday following signs of outsized buying of Italian debt by the European Central Bank.
Data released late on Monday showed the ECB bought far more Italian bonds than it was supposed to in July for its monetary stimulus scheme, making up for a dwindling supply of eligible debt elsewhere in the currency bloc.
The ECB and Bank of Italy together bought 9.6 billion euros worth of Italian debt, nearly one and a half billion euros more than the composition of the 60-billion euros monthly purchase would dictate.
This was the biggest deviation from Italy's quota relative to the size of the overall monthly amount.
French and Spanish bond purchases were also oversized compared to their shares of the ECB's capital, the yardstick used to determine how many bonds must be bought.
The overbuying of Italian and Spanish bonds by the ECB has helped pin down yields in peripheral Europe, while speculation grows that the central bank is likely to signal a scaling back of the purchase programme in coming months given stronger economic growth.
"It is interesting that we see a persistent deviation of the ECB's capital key target and that it bought more Italian bonds than it should. Relatively this is supportive for BTPs," said Martin van Vliet, senior rates strategist at ING.
Italy's 10-year bond yield was little changed at around 1.98 percent on Tuesday, leaving the gap over benchmark 10-year German Bund yields at around 153 basis points -- just a touch above this year's lows hit last week at around 152 bps.
That gap has tightened about 25 bps in the past month alone, reflecting strong demand for Italian debt.
Analysts say recent spread tightening also reflects strength in carry trades with investors borrowing in low-yielding assets to invest in higher-yielding ones such as the euro zone's lower-rated bond markets.
"Event risk after the ECB meeting last month has been reduced and people are willing to play the carry trade," said van Vliet, adding that he believed any further tightening in the Italian/German bond spread was likely to be limited.
Across the euro zone, bond yields were largely flat.
Ten-year Bund yields were steady at 0.46 percent -- keeping last week's one-month lows in sight after data showed German exports fell more than expected in June.
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(Reporting by Dhara Ranasinghe; editing by John Stonestreet)