* Euro zone bond yields up 2-6 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 (Reuters) - Euro zone government bond yields were broadly higher on Friday, as strong Chinese economic data and a promise by U.S. President Donald Trump to make a major tax announcement soon renewed concerns about a pick-up in global inflation.
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 will help boost growth and inflation, pushing U.S. Treasury yields higher. Upbeat Chinese trade numbers on Friday added to a sense that inflationary pressures might be stirring.
In addition, Trump 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.
The comments 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 Albrecht said.
Most euro zone bond yields were 2-6 basis points (bps) higher. Still, a host of political risks in the bloc, including renewed concern about Greece, meant that selling in Germany, the euro zone’s benchmark issuer, was limited.
German 10-year Bund yields were up 1.5 bps at 0.32 percent but were set to end the week about 9 bps down - the biggest weekly fall for seven weeks, as were French 10-year bond yields, although they rose 4 bps to 1.03 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.
In addition to the French elections jitters and concerns about political risks elsewhere in the euro zone, worries that the European Central Bank might unwind its hefty bond-buying stimulus has also hurt regional markets in recent weeks.
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.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Editing by Louise Ireland)