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Italy leads euro zone bond yields lower ahead of ECB line-up

* Euro zone bond yields hover near lows

* ECB's Draghi, Praet, Coeure all scheduled to speak

* US/German 2-year yield gap close to widest since 1999

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

LONDON, Oct 18 (Reuters) - Italian bond yields fell to five-weeks lows on Wednesday, leading yields in the euro area down as investors looked to speeches by ECB officials for fresh insights on their thinking before next week's closely-anticipated central bank meeting.

European Central Bank chief Mario Draghi, Chief Economist Peter Praet and Executive Board Member Benoit Coeure are among those officials scheduled to speak.

They are in the spotlight after a report last week that ECB rate setters were moving towards announcing more asset purchases at lower volumes at the October meeting.

The ECB is widely expected to scale back its 2.3 trillion euro asset purchase scheme programme given stronger economic conditions, but a growing perception that this process will be prolonged has bolstered policy-sensitive bond markets.

Given that people are feeling brighter about the economy, the ECB should consider tweaking its bond-buying scheme, Governing Council member Ardo Hansson told newspaper Handelsblatt.

Italy's 10-year bond yield dipped a basis point to 1.988, a five-week low. Demand for Italian debt also been bolstered in the past week by a reduction in political uncertainty.

German bond yields were also a touch lower, trading at 0.36 percent and within sight of Tuesday's 5-week low. Other euro zone bond yields were little changed in early trade.

"Speeches from Draghi and Praet will also be closely followed for hints at how the central bank will manage the process of reducing new asset purchases to zero over the next year or so," said Craig Erlam, senior market analyst at Oanda.

"The ECB is expected to make an announcement next week, with the consensus reportedly favouring a 30 billion euro reduction until September, likely followed by a reduction to zero."

A growing view that ECB asset purchases will go on lower for longer comes at a time when markets are positioning for further U.S. rate increases, pushing 2-year U.S. Treasury yields to 9-year highs this week.

That divergence has pushed out the gap between U.S. and German bonds -- the benchmark in the euro area -- in recent days.

The difference between 10-year bond yields in the U.S. and Germany is around 194 basis points and close to its widest in four months.

The gap between short-dated U.S. Treasury yields and their German counterparts is around 229 bps and close to its widest level in 18 years.

"We would point at the acceleration of the UST-Bund widening this week as evidence that the policy divergence trade is setting in and that euro zone government bonds can rally further," analysts at Mizuho said in a note.

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(Reporting by Dhara Ranasinghe; Editing by Matthew Mpoke Bigg)