* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By Yoruk Bahceli
LONDON, Nov 26 (Reuters) - Euro zone bond yields held steady on Tuesday as U.S. and Chinese officials appeared to make progress in agreeing the first phase of a trade deal.
Top trade negotiators from China and the United States held a phone call on Tuesday morning, China’s Commerce Ministry said, as the two sides try to agree a preliminary deal to end a trade war that has dragged on for 16 months.
Encouraging reports out of China and the United States on Monday had pushed yields higher after uncertainty around the negotiations and weak euro zone data boosted safe-haven assets last week.
“If I look at the yield changes this morning ... what we can see is that the yields, especially core, in the European Monetary Union are not falling this morning, so this is because of the positive backdrop,” said DZ Bank rates strategist Sebastian Fellechner.
Most euro zone bond yields were flat in early trade. Benchmark German 10-year bund yields were at -0.34%, far off a five-month high at -0.22% reached earlier in November that had been driven by growing trade optimism.
“We have seen a lot of progress, but what we need right now to see rising yields is a real agreement on the last stage of the phase-one deal. We had a lot of comment; now we need actions,” said DZ Bank’s Fellechner.
The mood among German consumers rose unexpectedly heading into December, a survey showed on Tuesday, suggesting that household spending will continue to prop up growth.
Consumer spending helped Germany avoid a recession in the third quarter, although its manufacturing remains in contraction.
European Central Bank Vice President Luis de Guindos and board member Benoit Coeure will speak on Tuesday. On Monday, Austrian governing council member Robert Holzmann said all monetary policy objectives will be fair game in a policy review that he said would start in January.
Holzmann’s comments have reinforced the view that the bar for further ECB stimulus is high.
“Attention turns to potential changes to the central banks’ definition of price stability,” ING analysts said in a client note. (Reporting by Yoruk Bahceli, editing by Larry King)