February 3, 2020 / 9:12 AM / in 22 days

Euro zone bond yields inch up, keep multi-month lows in sight

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

LONDON, Feb 3 (Reuters) - Euro zone bond yields edged up on Monday, reflecting a slightly more positive tone in world markets that have been gripped by worries over the economic fallout from the spread of the coronavirus.

Yields on benchmark 10-year government bonds across the currency bloc were 1-2 basis points higher on the day, reflecting a better mood in world markets. European shares edged higher at the open while U.S. stock futures rallied .

Chinese markets sold off sharply on Monday -- the first trading session after an extended Lunar New Year break. But this was mostly a product of selling pressure that had built up over the holiday and not a reflection of new market fears, analysts said.

Germany's benchmark 10-year Bund yield was 1.1 basis points higher on the day at -0.43%, not too far off more than three-month lows hit at the end of last week.

Reflecting an underlying cautious tone among investors, yields on German 30-year government bond yields are at 0.07% -- less than 10 basis points away from negative yield territory.

"Over the coming days, investors are likely to upgrade their estimates of the expected economic fallout related to 2019-nCov (coronavirus)," analysts at UniCredit said in a note.

"As long as the increase in the number of cases does not flatten perceptibly, market sentiment will most probably remain under pressure."

Renewed uncertainty over Britain's future relations with the European Union also limited the rise in euro zone bond yields.

UK Prime Minister Boris Johnson will lay out his negotiating terms for talks with the European Union on Monday, saying Britain will prosper even if he cannot strike his preferred trade deal. (Reporting by Dhara Ranasinghe Editing by Peter Graff)

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