(Corrects time of ECB minutes release to 1130 GMT in paragraph 10) Oct 7 (Reuters) - Euro zone bond yields fell on Thursday as energy prices continued to dip, recovering from a sharp sell-off a day earlier that had been driven by inflationary concerns. As gas and oil prices shot up on Wednesday, bonds sold off and yields, which move inversely with prices, rose sharply as concerns that the price rises would stoke already high inflation drove market-based inflation gauges sharply higher. But gas and oil prices fell later, helped by comments from Russian President Vladimir Putin and an unexpected rise in U.S. crude inventories and a sustained fall on Thursday drove bond yields and inflation expectations lower in the euro area. Democrats in the U.S. Senate saying they might accept a Republican proposal to defuse the partisan stand-off that has threatened a U.S. debt default later in October has also helped. By 1105 GMT, Germany’s 10-year yield, the benchmark for the euro area, was down nearly 2 basis points to -0.20% below the highest since end-June at -0.147% hit on Wednesday. Italian bonds, which underperformed on Wednesday, were outperformers on Thursday with the 10-year yield down over 4 bps to 0.85%, pushing the yield gap with German peers to around 104 bps, from Wednesday’s one-week high at 108 bps. A key market gauge of euro inflation expectations tracked by the ECB fell as low as 1.7695%, the lowest in over a week and some 10 bps below the seven-year high they touched on Wednesday. Falling energy prices have helped stabilize bond markets, but, “ultimately, through that noise, we think rates are going up,” said Antoine Bouvet, senior rates strategist at ING. Bouvet stressed the risks arising from the hawkish turns not only from the U.S. Federal Reserve and the Bank of England, but also the ECB, where some policymakers have expressed concern that high inflation may be less transitory than expected. The ECB will release its September meeting accounts at 1130 GMT. They follow a Bloomberg News report citing sources that the bank is studying a new bond-buying programme to prevent market turmoil when its pandemic emergency bond purchase programme (PEPP) expires next year. The potential new programme would replace the PEPP as well as the ECB’s conventional bond purchases and it would circumvent rules that govern how much of each country’s debt the ECB would buy, the report said, adding that no decision has been made. “It’s not by chance that it comes out now ahead of a very important December (policy) meeting,” ING’s Bouvet said. There was little market reaction to the report, but Bouvet said that the parameters of a potential new programme would be crucial, as optionality could also mean the ECB buys fewer bonds overall than it would if it just increase the size of its conventional purchases once PEPP expires. Investors are also eyeing speakers from the bank including chief economist Philip Lane and board member Isabel Schnabel, while other speakers stressed that they think inflation and surging energy prices will be transitory. In the primary market, Spain and France raised medium and long-dated bonds at auctions. (Reporting by Yoruk Bahceli; Editing by Alison Williams and Toby Chopra) Our Standards: The Thomson Reuters Trust Principles.