(Recasts, adds analyst comment) Nov 15 (Reuters) - Euro zone bond yields rose on Monday, tracking moves in U.S. Treasuries after falling earlier in the session as the focus was on a debt supply shortage that has kept a lid on the bloc’s borrowing costs. U.S. Treasury yields steadied as investors weighed concerns about the growing rate of COVID-19 infections against new Treasury supply this week and the likely effects of the Federal Reserve reducing its bond purchases. “U.S. Treasuries took the lead this afternoon. I think U.S. yields have room to rise to levels more consistent with the macro backdrop to around 1.7%,” Massimiliano Maxia, senior fixed income specialist at Allianz Global Investors, said. Analysts see bond scarcity in the euro area, as issuance falls while demand rises for safe assets to use as collateral. That has been seen as keeping bond yields contained while euro area swaps rates have risen relative to government bonds. That contributed on Friday to a fall in bond yields, including on shorter-dated paper, even as money markets priced in two full rate hikes from the European Central Bank by the end of 2022. The bloc’s government bonds, whose yields move inversely with their prices, were also likely supported by member states moving to implement lockdown measures to curb the spread of the coronavirus, with Germany the latest country to plan tighter curbs. LOW ISSUANCE Jens Peter Sorensen, chief analyst at Danske Bank, said low issuance heading towards the end of the year was keeping bond yields in the bloc depressed as it is being outpaced by the European Central Bank’s bond purchases. Sorensen said benchmark issuer Germany was “especially mis-matched”, as it would issue 16 billion euros of bonds against 15.5 billion euros of flows from maturing debt and 25-30 billion euros of ECB purchases, keeping fresh supply available to investors sharply negative. By 1621 GMT, Germany’s 10-year yield, the benchmark for the bloc, was up 1.5 basis point to -0.24%. Italian bonds, continued to underperform and the 10-year yield was up 2.5 bps to 0.98%. That pushed the closely watched spread they pay over German peers to 122 bps. The market should see around 16 billion euros of issuance this week, but net supply will be positive with few coupon payments and redemptions to offset the issuance, Commerzbank analysts said. European Central Bank president Christine Lagarde on Monday continued to push back on calls and market bets for tighter monetary policy. Supply shortages and industrial bottlenecks are weighing on euro zone growth while pushing inflation higher, ECB Vice President Luis de Guindos said. A press report suggesting the European Central Bank is conducting bond purchases with an informal limit of just under 50% of each country’s debt issuance – above the current formal limit of 33% -- didn’t trigger any price action. (Reporting by Yoruk Bahceli and Stefano Rebaudo; Editing by Bernadette Baum)