* Euro zone bond yields up 2-8 basis points
* Risk-on mood in markets dents appetite for bonds
* But most markets set to end week on firm footing
* German yields set for biggest weekly fall for 7 weeks
* Euro zone periphery bond yields tmsnrt.rs/2ii2Bqr
By Dhara Ranasinghe
LONDON, Feb 10 Euro zone government bond yields
were broadly higher on Friday, as a promise by U.S. President
Donald Trump to make a major tax announcement soon and strong
Chinese economic data renewed concerns about a pick-up in global
Trump said on Thursday that in coming weeks he would
announce something "phenomenal" in terms of tax and developing
U.S. aviation infrastructure.
That renewed speculation Trump's economic policies would
help boost growth and inflation, pushing U.S. Treasury yields
higher. Upbeat Chinese trade numbers on Friday added to a sense
that inflationary pressures were stirring.
Trump also changed tack and agreed to honour the
longstanding "one China" policy during a phone call with China's
leader, a major diplomatic boost for Beijing which brooks no
criticism of its claim to neighbouring Taiwan.
This helped ease investor concern about geopolitical risks,
boosting stocks and taking the edge off safe-haven bonds.
"We've had Trump's comments on tax reform, the phone call
with China and quite decent China trade data, so there is a
risk-on mood again in markets," DZ Bank rates strategist Rene
Signs of progress on Greek debt talks also helped weaken
demand for top-rated German Bunds, analysts said.
Germany's benchmark 10-year Bund yield rose 2 basis points
(bps) to 0.33 percent, while Greece's two-year
bond yield fell more than 150 bps to 8.59 percent.
Euro zone lenders and the International Monetary Fund have
agreed between themselves to present a common stance to Greece
later on Friday in talks on reforms and the fiscal path Athens
must take, euro zone officials said.
Greek bonds had come under pressure this week from concerns
that its bailout programme is being held up by a dispute over
"There seems to be a high degree of will to put this issue
to bed prior to elections in the euro zone," Rabobank fixed
income strategist, Lyn Graham-Taylor, said.
Most other euro zone bond yields were 3-8 bps higher.
Still, in a week that has seen heightened fears about euro
zone political risks, Bund yields were set to end the week down
8 bps - the biggest weekly fall for seven weeks.
French yields were also set for a weekly fall of 4 basis
points, although they rose 6 bps to 1.04 percent on Friday.
In the past two days, investors have taken back some of
their most aggressive bets against French bonds, allowing the
market to recover.
French bond yields climbed near to a 17-month high on Monday
as fears about a strong showing for far-right leader Marine Le
Pen ahead of a presidential election rattled markets.
Societe Generale said the "Armageddon risk" ahead of the
French elections is overdone.
"Finally, there was a realisation that short positioning in
OATs had just gone too far," SocGen analysts said, referring to
French government bonds.
Adding to political jitters, worries that the European
Central Bank (ECB) might unwind its hefty bond-buying stimulus
has also hit bond markets in recent weeks.
ECB Executive Board member Yves Mersch said on Friday the
central bank needs to take rate cuts off the table.
(Editing by Louise Ireland and Toby Davis)