Euro zone bond yields hold near multi-year lows on ECB rate tiering talk

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

LONDON, March 28 (Reuters) - Core euro zone government bond yields held near multi-year lows on Thursday as speculation mounted that the ECB would introduce a tiered deposit rate to ease strains on banks amid continued low economic growth.

European Central Bank chief economist Peter Praet told Bloomberg that ECB staff were examining the issue of tiering, but that it was premature to talk of its introduction.

Expectations of rate tiering fuelled a huge rally in euro zone government bonds on Wednesday, after a comments from ECB President Mario Draghi boosted talk that the ECB may be considering steps such as a tiering of interest rates to ease pressure on banks.

The move south gathered momentum after a Reuters report that the ECB is looking at ways to cut the charges banks pay on their excess cash to offset the side-effects of sub-zero rates.

Expectations of more accommodative monetary policy saw German bond yields extend the seven basis points fall recorded a day earlier, while other euro zone bond yields also extended falls. It also saw inflation expectations fall to new lows, and prompted money markets to slash rate hike expectations. .

"It's an absolutely crazy environment," said Brian Giuliano, vice president of portfolio management for fixed income at Brandywine Global in Philadelphia.

"On the ECB, I get why they are talking about LTROs, I get why they are talking about a dovish pivot in pushing out rate hikes," he said. "Should we be cutting rates now? I don't think it's that dire in the euro zone."

Germany's 10-year bond yield, the benchmark for the region, was down almost one basis point on the day to -0.089 percent , while its five-year yield, which on Wednesday recorded its biggest one-day fall in almost two years, was largely flat on the day to -0.50 percent.

Deeply negative yields were no deterrent to primary supply however, with Germany selling its first negative yielding bond since 2016.

Further downward pressure on safe-haven assets may also be coming from concerns over Britain's EU exit. The British parliament on Wednesday failed to reach an agreement on the progress of Brexit, rejecting all eight alternative options.

Weaker data may also fuel the repricing says Commerzbank. Later on Germany, Spain and Belgium will report flash inflation numbers, while euro zone business and consumer confidence will also be released.

Ten-year Gilts opened 1.4 basis points lower at 1.001 percent.

Italian bond yields rose higher ahead of an up to 6.5 billion euro sale of five and 10 year BTPs. Its five and 10-year bond yields were over four basis points higher in early trade ,.

Spain is studying the issuance of so-called "green bonds" to help businesses fund reforms necessary under the government's environmental plan, Economy Minister Nadia Calvino told Reuters in an interview on Wednesday. (Reporting by Virginia Furness)