* Yields mostly flat after Tuesday’s Brexit-induced drop
* In quiet session, investors wait for German Ifo data
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
LONDON, Dec 18 (Reuters) - Euro zone bond yields steadied in early trading on Wednesday after falling on renewed anxiety about Brexit after Britain set a hard deadline of December 2020 to reach a new trade deal with the European Union, creating a new cliff-edge.
In a quiet start to the trading session, investors are preparing for the German business sentiment Ifo survey at 0900 GMT for a gauge of confidence in the euro zone’s biggest economy. November inflation numbers for the 19-country bloc are due at 1000 GMT, although they are unlikely to move markets much given previously released flash data.
Prime Minister Boris Johnson’s ruling-out on Tuesday of any extension to the transition period after Britain leaves the EU on Jan. 31 caught markets off-guard after they had priced out many Brexit worries following his election victory last week.
Investors have dumped safe-haven government debt for riskier assets in recent weeks on signs the euro zone economy is rebounding and in anticipation of an agreement on the first phase of a U.S.-China trade deal.
Jan von Gerich, an analyst at Nordea, said that despite concerns about the Brexit negotiations he expected sentiment in bond markets to remain upbeat going into 2020.
“The general tone is still positive in that people think the worst is behind us for the economy,” he said, while adding that he didn’t “buy the optimism” about the health of the euro zone economy and the phase one deal between Washington and Beijing.
Investors are nevertheless ready to push yields higher, von Gerich said, believing economic and political uncertainty had eased. The 10-year German bond yield could rise another 15 to 20 basis points in the coming weeks, with a move back into positive territory not out of the question, he added.
The German 10-year yield stood at -0.29% on Wednesday, unchanged on the day, while other core euro zone yields were also little moved.
Yields in southern Europe hovered around recent levels, with the Spanish 10-year yield at 0.398% and the Italian 10-year yield at 1.286%.
The 10-year British gilt yield dropped another basis point to 0.753% after falling 3 bps on Tuesday.
There was little fresh news overnight on the rumoured trade deal between China and the United States.
Optimism that the world’s two largest economies will resolve their most serious trade disagreements has helped fuel a rally in stocks and a selloff in euro zone debt since October, reversing much of the collapse in government bond yields to record lows seen in August and September. (Reporting by Tommy Reggiori Wilkes; Editing by Catherine Evans)