* 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 (Updates prices)
By Dhara Ranasinghe
LONDON, Feb 10 (Reuters) - 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 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 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 Albrecht said.
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 fiscal targets.
“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)