* ECB expected to deliver easing package
* Trump bans travel from Europe, rattles markets
* Yields, inflation expectations near record lows
* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr (Updates with price action, 2-yr bonds and inflation expectations)
LONDON, March 12 (Reuters) - Two-year bond yields in Germany were back below minus 1% on Thursday, and a key gauge of euro area inflation expectations hit a record low before a European Central Bank meeting expected to deliver a new wave of stimulus to fight the coronavirus.
The virus has led to a lockdown in Italy, caused turmoil on world markets and dealt another blow to a weakened euro zone economy.
Germany's two-year bond yield fell five basis points to -1.01%, nearing Monday's record low of -1.04%.
Having hovered in a tight range for months, the Schatz yield has tumbled 40 basis points in three weeks -- a sign that investors are positioning for new ECB stimulus.
The five-year, five-year breakeven inflation forward, a market measure of long-term euro zone inflation expectations, hit a new record low below 1% -- another worrying sign for a central bank that targets inflation near 2%.
"The ECB meeting will be hugely important, but it's very difficult to call what kind of easing is likely," said Ross Hutchison, rates fund manager at Aberdeen Standard Investments. "A rate cut is plausible ... but I don't see that as an effective policy option."
A 10 bps rate cut is priced in by markets. The ECB is also widely expected to provide new, ultra-cheap loans for banks to pass on to small and medium-sized firms.
The Bank of England delivered an emergency half-point rate cut on Wednesday and the U.S. central bank cut rates last week to guard its economy against the coronavirus.
U.S. President Donald Trump on Wednesday banned travel from most of Europe, adding to unease in world markets.
Analysts said a collapse in inflation expectations - exacerbated by a crash in oil prices - and a widening in government bond yields also puts pressure on the ECB to increase monthly asset purchases, currently at 20 billion euros ($22.5 billion).
In Italy, the centre of the coronavirus outbreak in Europe, the 10-year bond's yield gap over Germany on Monday blew out 50 bps -- the biggest widening of the spread in a single day since May 2018.
Other sovereign bonds' spreads over Germany have also widened.
"We would suggest that an expansion of QE (quantitative easing) is, to some extent but far from fully, priced and so a lack of an announcement today will likely see sovereign spreads widen," said Rabobank rates strategist Lyn Graham-Taylor.
Germany's 10-year Bund yield fell 2.5 bps to -0.80% , keeping Monday's record low in sight. Italian bonds sold off with other risk assets, pushing 10-year bond yields there up 13 bps to 1.32%. ($1 = 0.8896 euros)
(Reporting by Dhara Ranasinghe, editing by Larry King and Timothy Heritage)