* AItaly budget meeting scheduled for Monday - media
* S&P lifts ratings outlook on Portugal
* Reports Trump to impose more tariffs on China at 10 pct
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By Dhara Ranasinghe
LONDON, Sept 17 (Reuters) - Italian government bond yields fell on Monday amid hopes for a market-friendly 2019 budget, before a key meeting of government ministers that local media reported aimed to “pin down some numbers.”
Italian Prime Minister Giuseppe Conte, his two deputy prime ministers and Economy Minister Giovanni Tria are due to meet on Monday over the country’s 2019 budget, the Corriere della Sera newspaper reported.
In a separate unsourced report, Corriere also said that Tria was set on preventing Italy’s budget deficit from rising above 1.6 percent of gross domestic product next year.
Markets have been on edge over Italy’s next budget after an anti-establishment coalition took power in early June, pledging to ramp up public spending and to unwind past deficit-curbing measures.
Recent weeks have seen a recovery in sentiment towards Italian bonds after top officials said the government will respect European Union rules on fiscal discipline.
“Some reassuring comments from the finance ministry that they will aim for a budget deficit of 1.6 percent are helping Italian bonds,” said DZ Bank rates strategist Sebastian Fellechner.
Reports of a proposal by League - one of the two parties that make up the Italian government - to give tax breaks to savers who buy Italian debt, was also helping sentiment, he said.
Yields on Italian debt fell as much as 12 basis points on the day in early trade.
With most euro zone bond yields largely flat, Italy stood out as the bloc’s best-performing debt market.
Yields on 10-year bonds were down 8 bps at 2.91 percent , pushing the gap over benchmark German Bund yields to 244 bps.
“I happily stick with my view that the spread will move down through 200 bps during the next couple of months, as clarity emerges on the budget,” UniCredit chief economist Erik Nielsen said in a note.
On Friday, HSBC said it sees value in short-dated Italian government debt.
Elsewhere, reports that Washington was about to announce a new round of tariffs on Chinese imports supported fixed income markets.
Germany’s 10-year bond yield was steady at 0.45 percent, below six-week highs hit on Friday.
Portuguese bond yields dipped after S&P on Friday lifted the outlook on Portugal’s credit rating to positive.
S&P, which a year ago became the first of the big three credit agencies to restore Portugal’s investment grade, affirmed the country’s rating at BBB.
Reporting by Dhara Ranasinghe, editing by Larry King