UPDATE 1-Benchmark German bonds set for best week in 3 1/2 months

* Euro zone periphery govt bond yields (Adds Ifo survey, updates prices)

AMSTERDAM, March 26 (Reuters) - Euro zone bond yields edged up on Friday but benchmark German bonds were set for their best weekly performance in more than three months as the bloc’s coronavirus woes supported its safe-haven assets.

Global government bond yields shot up in February on bets that a vast U.S. stimulus package would reignite economic growth and inflation.

That pushed euro zone bond yields higher following U.S. Treasuries, causing concerns about a possible tightening of financial conditions in the bloc as it faces a weaker economic outlook.

But with the European Central Bank increasing the pace of its asset purchases and attention turning to challenges linked to Europe’s slow vaccination rollout, its bond yields have fallen in March, in contrast to bond yields in the United States, which have continued to rise.

On Friday, as European stocks hit one-week highs, the yields on Germany’s 10-year Bund, the safe-haven benchmark for the euro zone, was up nearly 3 basis points to -0.36% at 1003 GMT, after falling to its lowest since mid-February on Thursday.

Bunds continued to outperform U.S. Treasuries on Friday, where the 10-year yield was up 4 basis points in early London trade after a relatively weak seven-year auction on Thursday. Bond yields move inversely with prices.

But down 6 basis points this week, 10-year Bund yields are set for their biggest weekly fall since the week ending Dec. 11.

On the data front, European investors were watching Germany’s Ifo survey, which showed business morale hit its highest level in almost two years, far higher than the rise a Reuters poll had expected.

This had little impact on government bonds, however, much like the stronger-than-expected business activity surveys on Wednesday.

“Indeed, for the time being, it appears that European government bonds are being more influenced by the ongoing support of the ECB and negative news on the pandemic in Europe,” UniCredit analysts told clients.

The focus of the European Central Bank’s asset purchases is shifting to bond prices from purchase volumes, ECB board member Isabel Schnabel said late on Thursday, after its bond buying rose by a half last week.

The comments suggest that the focus in the coming months will be on yield levels rather than a mechanical fulfilment of a purchase quota.

But Schnabel disputed suggestions that the bank is now engaged in yield-curve control -- a strategy where a central bank targets a specific rate on longer-term bonds and buys what is necessary to enforce it. (Reporting by Yoruk Bahceli; editing by Gareth Jones, Larry King)