Wires

UPDATE 1-Euro zone bond yields creep up, central bank doubts dominate

Yoruk Bahceli and Dhara Ranasinghe

* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr (Recasts, adds analyst comments)

LONDON, Oct 2 (Reuters) - Euro zone bond yields inched up on Wednesday in a counter-intuitive move after weak data releases this week, reflecting concern that the European Central Bank is running out of room to manoeuvre in the face of a weakening economy.

Yields fell on Tuesday after poor U.S. manufacturing data, then headed up again on Wednesday even as stock markets sold off. . Analysts cited a number of reasons for the sell-off in bonds, which usually benefit from risk-off sentiment.

One is the persistent call by European Central Bank President Mario Draghi for more fiscal stimulus. fuelling concern that looser ECB monetary policy easing may have run its course.

Divisions on the ECB board and questions about the efficacy of ECB policy have added to a sense that the bar to further policy easing is high, analysts said.

"If you don't expect central banks to come to the rescue, bonds have no reason to go up massively," said Stéphane Barbier de la Serre, a Makor Capital Markets macro strategist, referring to bond prices, which move inversely to the yield.

Germany's 10-year benchmark yield is up 3 basis points this week, reversing some of last week's rally, when it fell 6 bps on another series of poor data releases. It was 1.5 bps higher on Wednesday at -0.54%.

Draghi said late on Monday that the most effective treatment for the euro zone's sluggish economy would be investment-led stimulus at the euro zone level.

Germany has been dragging its feet about providing fiscal stimulus to its economy, which is on the brink of recession.

Bundesbank head Jens Weidmann reaffirmed his opposition on Tuesday to relaxing the terms of the ECB's quantitative-easing programme so that it can buy even more government debt.

"In the wake of the ECB meeting, we've got a sense that there is so much division on the ECB board so further easing will be difficult," said Pooja Kumra, European rates strategist at TD securities.

Most 10-year government bond yields in the region were up 1 to 2 bps .

Analysts also said euro zone bonds have taken a cue from Japan. The Bank of Japan has been signalling it may ease policy further by pushing down short- and medium-term yields but still allow the yield curve to steepen at the longer end, which discouraged purchases at Tuesday's auction.

There was also pressure on euro zone bonds from British gilts. Ten-year gilt yields were up 4 bps at 0.51% with UK Prime Minister Boris Johnson due to make his final offer to the European Union on a Brexit deal.

In the United States, ADP employment numbers are due at 1215 GMT, which will set the stage for non-farm payroll numbers on Friday.

Meanwhile, the first quote for the ECB's new benchmark rate ESTR was released at -0.549%, 9.8 basis points below the last EONIA reading. (Reporting by Yoruk Bahceli and Dhara Ranasinghe; additional reporting by Josephine Mason; editing by Larry King)