* Euro zone bond yields up 2-6 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
By Dhara Ranasinghe
LONDON, Feb 10 Euro zone government bond yields
were broadly higher on Friday, as strong Chinese economic data
and a promise by U.S. President Donald Trump to make a major tax
announcement soon renewed concerns about a pick-up in global
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 will help
boost growth and inflation, pushing U.S. Treasury yields higher.
Upbeat Chinese trade numbers on Friday added to a sense that
inflationary pressures might be stirring.
In addition, Trump 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.
The comments 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
Most euro zone bond yields were 2-6 basis points (bps)
higher. Still, a host of political risks in the bloc, including
renewed concern about Greece, meant that selling in Germany, the
euro zone's benchmark issuer, was limited.
German 10-year Bund yields were up 1.5 bps at 0.32 percent
but were set to end the week about 9 bps down -
the biggest weekly fall for seven weeks, as were French 10-year
bond yields, although they rose 4 bps to 1.03 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.
In addition to the French elections jitters and concerns
about political risks elsewhere in the euro zone, worries that
the European Central Bank might unwind its hefty bond-buying
stimulus has also hurt regional markets in recent weeks.
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.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Editing by Louise Ireland)