* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr June 9 (Reuters) - Southern European governments are taking advantage of calm in bond markets to raise funding ahead of a closely-watched European Central Bank meeting, with Greece following Italy with a bond sale on Wednesday. Euro zone bond yields have fallen sharply in recent weeks, on dovish commentary from ECB officials leading investors to bet that it is unlikely that the bank will slow its pandemic emergency bond purchases at its policy meeting on Thursday. That has helped countries most vulnerable to a tapering of those purchases to raise funding in the market this week. Greece, the bloc’s most indebted state, re-opened an outstanding 10-year bond via a syndicate of banks on Wednesday. It follows Italy, which raised 10 billion euros from a 10-year syndicated bond sale on Tuesday, receiving 65 billion euros of demand. Italian bonds rallied strongly in the aftermath of the deal, a sizable offering with the potential to put pressure on the market. Benchmark 10-year yields fell to their lowest since May 7, suggesting the market had little struggle absorbing the paper. The new bond itself traded up in price terms in the secondary market on Wednesday, in further evidence of strong demand. Issuers are also keen to get their deals done before the European Union starts selling bonds to finance its coronavirus recovery fund, most likely starting next week. In addition to the syndicated deals, Germany will raise 1.5 billion euros from the re-opening of a 30-year bond and Portugal will offer up to 1 billion euros of bonds due 2027 and 2031 in auctions. Euro area bond yields held around early May lows on Wednesday,, with Germany’s 10-year yield, the benchmark for the bloc, down 1 basis point at -0.23% by 0739 GMT. Italy’s 10-year yield fell 4 basis points to 0.82%, pushing the closely-watched gap with the benchmark German yield to 105 bps, the lowest since May 5. “It is clear that the market is pricing in the extension of the ECB’s accelerated asset purchase pace as a base case,” ING analysts told clients. “For ECB President (Christine) Lagarde the challenge will be to avoid muddying the dovish message that maintaining the buying pace would convey. In turn the potential downside for rates markets out of tomorrow’s meeting is increasing,” they added. (Reporting by Yoruk Bahceli; editing by Emelia Sithole-Matarise) Our Standards: The Thomson Reuters Trust Principles.