* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr LONDON, April 26 (Reuters) - Euro zone bond yields edged higher on Monday, reflecting brighter sentiment in world markets and a growing sense the worst may be behind for a coronavirus-battered economy. Most 10-year bond yields across the currency bloc were up 1-2 basis points on the day, while U.S. Treasury yields were also a touch higher. While bond markets have stabilised from a U.S. led selloff earlier this year, improving economic indicators and a pick up in the COVID-19 vaccination rollout have started to put some upward pressure on euro area borrowing costs. The past few weeks have seen an acceleration in European vaccinations, with large European Union countries rolling out shots at a similar pace to Britain. The EU should meet its target of vaccinating 70% of adults by summer, according to NatWest Markets. Germany’s 10-year Bund yield was last up 2 basis points on the day at -0.24%, not far off seven-week highs hit last week. Thirty-year bond yields, at 0.31%, were near more than one-year peaks touched last week. Andreas Billmeier, European economist Western Asset, said the uptrend in European bond yields should be gradual and fits in with the overall picture of a recovering economy. “If you take out the U.S. rates dynamic, what you have is an economic recovery and that should go hand in hand with higher rates.” “Note that the ECB (European Central Bank) didn’t make a peep when yields rose between December and February but only once volatility coming from the U.S. kicked in.” The ECB stepped up the pace of its bond purchases in March to contain a rise in borrowing costs, driven by U.S. Treasuries. There was some focus on Italy, which has reached a deal with the European Commission over its Recovery Plan, after days of intense talks, paving the way for it to be submitted to Brussels by the end of April. “Positivity from the smooth distribution of EU funds’ has yet to fully feed into the BTP/Bund spread, and there is still room for a great deal of tightening there,” Mizuho said in a note. The Italian/German 10-year yield gap was at 103 basis points S&P late on Friday raised Greece’s rating by a notch to ‘BB’, citing hopes of a rapid improvement in the country’s economic and budgetary performance as the adverse impacts of the COVID-19 pandemic subside. Greece’s 10-year bond yield was up around 1 bps at 0.90% in line with euro zone peers. (Reporting by Dhara Ranasinghe; Editing by Kirsten Donovan)