* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
* British bond yield curve extends flattening bias
* Germany, Netherlands kick off supply heavy week
By Saikat Chatterjee
LONDON, July 10 (Reuters) - Core European government bond yields were steady to slightly higher on Tuesday, with investors expecting further upward pressure as they prepare for fresh supplies of longer maturity paper this week.
Germany and the Netherlands kick off bond sales in 10-year maturities followed by Ireland and Italy later in the week, at a time when economic data in Europe has shown some signs of improvement relative to its U.S. counterparts after struggling earlier this year.
“Bond yields should edge higher this week because of supply pressures and as trade war concerns fade slightly, fostering more risk appetite,” said Peter Chatwell, head of rates strategy at Mizuho based in London.
Benchmark 10-year government debt in Germany rose nearly one basis point to 0.3150 percent while French and U.S. ten-year yields were broadly steady.
In terms of data, Germany’s ZEW index and Italian industrial production will be parsed to see if the economic pick-up is gathering momentum.
The improvement in risk appetite led to increased demand for peripheral debt, with bond yields in Italy and Greece edging down by 2 to 4 basis points across the curve.
In a sign of some reluctance to hold top-rated euro zone debt, data showed Japanese investors sold a net 712.1 billion yen ($6.45 billion) of German bonds in May, their largest net sales in more than a year.
German 10-year bond yields are down 50 bps from almost 2 1/2-year highs hit in February, on expectations that interest rates in the euro zone will stay low for some time.
A flattening bias was evident in the British yield curve with shorter-end debt supported by expectations of a rate hike in August while concerns over the longer-term outlook for the economy kept a lid on yields in longer maturities.
Spreads between ten- and two-year debt have tightened by more than 40 basis points from 2018 highs of 95 basis points hit in February. (Reporting by Saikat Chatterjee; editing by John Stonestreet)