ECB decision to leave rates unchanged weighs on Bunds

LONDON, March 6 (Reuters): German government bond yields rose on Thursday, led higher by the European Central Bank's decision to keep interest rates on hold and as talks to resolve the crisis in Ukraine dampened demand for safe-havens.

The ECB left rates unchanged in the face of uncomfortably low inflation, wrong-footing a minority in markets who had expected a cut.

But ECB President Mario Draghi may use a news conference at 1330 GMT to unleash other measures to pep up a fragile euro zone recovery, such as ending the so-called sterilisation of bond purchases under the its Securities Markets Programme (SMP).

"There's still a possibility that (Draghi) will announce some measures on the liquidity side which are usually not announced before the press conference," said Piet Lammens, a strategist at KBC in Brussels. "So there might be some non-sterilisation of the SMP programme which people talk much about recently."

German 10-year Bund yields, the benchmark for euro zone borrowing costs, rose 4 basis points to 1.65 per cent.

Talks to resolve the crisis in Ukraine were seen easing tensions and they also dragged on Bunds.