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Euro zone bond yields dip, reflect caution about U.S. stimulus hopes

* Yields down marginally in another quiet session

* Italian 10-year flirts with new record low

* Euro zone periphery govt bond yields: tmsnrt.rs/2ii2Bqr

LONDON, Oct 9 (Reuters) - Euro zone yields edged lower in early trading on Friday, with fixed income investors remaining cautious despite renewed hopes for a U.S. stimulus deal helping to lift sentiment in other markets.

Stocks rallied after U.S. President Donald Trump said on Thursday talks with Congress had restarted on targeted fiscal relief, after calling off negotiations earlier this week.

Investors are also betting that Joe Biden, Trump’s challenger in the Nov. 3 presidential election, will win, potentially leading to a bigger stimulus package.

But bond markets were quiet, with yields inching lower. Euro zone yields have held to tight ranges in recent weeks and volatility has been low, which analysts attribute to a wave of central bank asset purchases that has crushed price action.

On Friday, the 10-year German bond yield was unchanged at -0.525% while other core yields were a touch lower .

Analysts said investors’ reluctance to dump government bonds was a sign that momentum behind recent asset price rallies was stalling.

Mizuho analysts said the resilience of the bond market was “another sign that the momentum behind further risk-on is waning.”

“We expect rates to be bullish today with the possibility for the 10Y Bund (10-year German bond), to break through its recent resistance level,” they wrote.

Yields in southern Europe also headed marginally lower, with the Italian 10-year flirting with another record low. It was last at 0.71%. (Editing by Mark Potter)

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