* Benchmark Bund yields near six-week low
* French equivalents lowest since early January
* Qatar rift, Comey testimony sows geopolitical fears
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By John Geddie
LONDON, June 6 (Reuters) - Euro zone government bond yields hit multi-week lows on Tuesday as geopolitical tensions from the Middle East to the United States eroded the outlook for inflation.
A fall in French 10-year yields to their lowest since early January stood out as it came after a vote for lawmakers representing French who live abroad that was another indication that President Emmanuel Macron’s party is set to win a majority in the parliamentary election this month.
Europe’s benchmark German Bund yields fell to their lowest level in nearly six weeks at 0.262 percent, while Spanish equivalents dropped 3 bps to 1.55 percent, just above a four-month low of 1.50 percent.
“There is a general risk aversion theme going on,” Mizuho’s head of euro rates strategy Peter Chatwell said.
Oil prices have shed around 8 percent over the last 10 days and were holding below $50 a barrel on Tuesday on concerns as a political rift between Qatar and several Arab states threatens to undermine efforts by OPEC to tighten the market.
That collapse has conspired to erode inflation expectations in the euro zone. The five-year, five-year forward rate - a key measure of inflation in the bloc - has slid more than 20 bps since the start of the year.
At below 1.6 percent, it remains well below the ECB’s near 2 percent inflation target.
That is partly why investors are anticipating the ECB to strike a cautious tone at its policy meeting on Thursday, even though it is set to take a more benign view of the economy and potentially close the door to further stimulus.
Adding to the political tension, former FBI director James Comey is due to make a testimony before U.S. congress on Thursday. He might talk about his conversations with U.S. President Donald Trump about an investigation into former National Security Advisor Mike Flynn, who was fired for failing to disclose conversations with Russian officials.
Investors see this as a distraction for Trump who they are banking on to reflate the global economy with ambitious spending plans.
There was some relief for Greek bonds after IMF chief Christine Lagarde offered a compromise to Europe on debt relief that should allow the release of aid next month and avoid the potential for default.
The IMF believes Greece needs a debt haircut, which Germany rejects. But Lagarde told German newspaper Handelsblatt it could agree a deal whereby it stays on board in the bailout but not pay out further aid until debt relief measures are clarified.
This could allow euro zone finance ministers to give the go-ahead for their next payment to Greece at their meeting on June 15, funds they need to repay some 7 billion euros of debt maturing in July.
Yield moves, however, were minimal with two- and 10-year benchmarks shedding around 3 basis points.
Editing by Janet Lawrence