* Euro zone bonds broadly rally after Fed * ECB expected to reinforce accommodative rate policy stance * Peripherals lag higher-rated euro zone bonds By Ana Nicolaci da Costa LONDON, Aug 1 (Reuters) - Euro zone government bonds rallied on Thursday after the Federal Reserve said the U.S. economy still needed support, with the European Central Bank also expected to stick to its accommodative policy later in the day. The Fed offered no hint that it is planning to reduce its bond-buying stimulus at its next meeting in September and slightly downgraded its view of the recovery. The ECB, which holds a monetary policy meeting this session, is expected to reinforce its message that interest rates are on hold for an extended period, even though recent data has shown signs of a tentative recovery in the euro zone. That impression was strengthened by a poll showing euro zone manufacturing activity grew for the first time in two years in July. Reassurances that central bank liquidity would remain abundant pushed euro zone government bonds higher across the credit spectrum, including in Italy and Spain where rising political risk clouded the market picture. "What we are still seeing here is the impact of the Fed statement. Basically what it says is that (the) probability of tapering starting in December has increased versus September, so an overall dovish statement by the Fed," Elwin de Groot, senior market economist at Rabobank said. German Bunds jumped 71 ticks to 143.08, having reached a session high of 143.24 after breaking above a key technical level at 143. Ten-year German yields fell 6.2 basis points to 1.61 percent. Yields on bonds issued by other highly rated euro zone debt including Austria, France, Belgium and the Netherlands fell by about 6 basis points. The gains in Spanish and Italian government bonds were more modest as the market prepared for 3 billion euros of Spanish supply this session. The sale of 3- and 5-year bonds is expected to meet good demand. Ten-year Spanish yields were 2.5 bps lower at 4.60 percent and the Italian equivalent down 3.3 bps at 4.39 percent. One trader said markets were brushing off political risks in Italy and Spain, though these could come back to haunt them after German elections in September. Spain's Prime Minister Mariano Rajoy testified to parliament about a growing corruption scandal, while in Italy the Supreme Court is expected to rule on whether former prime minister Silvio Berlusconi should have his conviction for tax fraud upheld. {ID:nE8N0CB026] "There is political risk out of both Italy and Spain and I think there is bailout risk out of both Greece and Portugal," the trader said. "Periphery looks potentially in a mess. I think things have maybe been kept a little bit quiet until we get the (German) elections out of the way and then things blow up."

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