* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Updates prices) LONDON, Dec 9 (Reuters) - Core euro zone bond yields picked up on Wednesday as global equities resumed their risk-on rally, but analysts expected yields to extend their downward trend given near-term pressure from the COVID-19 pandemic. On Tuesday, Germany’s 10-year Bund yield fell below -0.6%, its lowest in a month, and Portugal’s 10-year bond yield turned negative for the first time on record, driven by risk aversion in global markets and ECB bond-buying. That move eased on Wednesday, as global market sentiment was boosted by optimism over COVID-19 vaccines and hopes for progress in fiscal stimulus negotiations in Washington. But analysts expected bond yields to continue to fall. “It seems odd to me that the market is looking around such a large corner in terms of apparently trading the optimistic long-run impact of the vaccine and ignoring the clearly deteriorating situation on the ground currently,” said Richard McGuire, rates strategist at Rabobank, citing record-high COVID-19 infections in the United States. At 1605 GMT, Germany’s benchmark 10-year Bund yield was at -0.606%, up nearly one basis point on the day. Rabobank expects the Bund yield to fall to -0.65% by the end of the year. Commerzbank’s head of interest rate strategy wrote in a note to clients that the Bund rally should continue and recommended buying on dips. Portugal’s 10-year bond yield, which fell on Wednesday to a record low of -0.01%, returned to positive territory during the morning, then dipped back below zero. At 1625 GMT, it was at -0.015%, down one basis point on the day. Spain’s 10-year yield was at 0.021%, down nearly one bp as well. “Given the moves yesterday, Spain might be next to join the negative rates club,” wrote Deutsche Bank strategists. The European Central Bank is expected to announce further monetary stimulus when it meets on Thursday, which will drive yields lower. “As rates markets turn gloomier, that ECB will have a hard time eliciting a dovish market reaction when it unleashes further stimulus tomorrow as widely expected, even as we expect the package itself to be generous,” wrote ING strategists. The two-day European Council meeting also starts on Thursday, where leaders will discuss Hungary and Poland’s veto on 1.8 trillion euros ($2.18 trillion) of funding. Poland and Hungary have preliminarily accepted an EU budget proposal from the EU’s Germany presidency and are awaiting further approval from the Netherlands and other sceptical member states, a Polish senior government official said. ($1 = 0.8254 euros)