* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Updates prices, adds analyst comment) LONDON, April 19 (Reuters) - Germany’s 10-year Bund yield rose on Monday to its highest level since late February, as the focus turned to prospects for greater fiscal spending after the Green Party announced its candidate for chancellor in a Sept. 26 federal election. It is the first time in its 40-year history that the left-leaning Green Party has proposed a candidate - party co-leader Annalena Baerbock - for the top job in German politics. Although she still only has an outside chance, the move underscores how the party has grown into a formidable force that is now just a few points behind Chancellor Angela Merkel’s conservatives, who have ruled for 16 years. While moves in the bond market were modest ahead of Thursday’s meeting of the European Central Bank, Baerbock’s candidacy will focus attention on possible economic reforms in Germany, given her pledges for a “new start” and greater investment in education, digital and green technologies. “At the least they (the Greens) could be part of the ruling coalition and could push for more of a fiscal boost,” said Antoine Bouvet, senior rates strategist at ING. “It’s not a surprise that the Greens are riding high in the polls but today’s news has put them in the spotlight.” Writing in a note published ahead of the Green Party’s announcement, Holger Schmieding, an economist at Berenberg, gave a 95% probability that the Greens would be part, either as a senior or a junior coalition partner, of the next German government. The 10-year Bund yield had traded flat for much of the morning session, but started to edge higher after the Green Party news, rising to its highest level in just over seven weeks at -0.216%. Yields later eased back in the afternoon to -0.235%, still their highest levels since February 26. Upcoming supply this week and an increase in U.S. Treasury yields also help explain the rise in euro zone debt yields. Italy’s 10-year yield was last up about 5 bps at 0.795% . New supply is estimated at more than 30 billion euros ($36 billion) this week, above the average for the year so far, according to Commerzbank. However, significant moves are unlikely before the ECB meeting. The bank has stepped up the pace of bond-buying in its Pandemic Emergency Purchase Programme since its March meeting to contain a rise in borrowing costs that could derail the recovery. Latest bond-buying data are released later on Monday. Bond markets have been attuned to signs of disagreement within the ECB over the future pace of bond purchases . Stefan Legge, an economist at the University of St Gallen in Switzerland, said he would pay attention to what the ECB says about anchoring long-term inflation expectations. “Right now, the ECB is highlighting that inflation in 2021 is higher because of one-time factors,” he said. “I’ll be watching what (policymakers) say about inflation and inflation expectations going forward as recent statements suggest they are willing to be more tolerant of higher inflation.”