Euro zone yields dip as investors eye Ukraine peace talks

Updates for afternoon European trading

LONDON, Feb 13 (Reuters) - Euro zone bond yields fell slightly on Thursday, after rising relatively sharply for two days, as investors digested comments by U.S. President Donald Trump promising a swift end to the Ukraine war.

Trump separately discussed the war on Wednesday with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy, and told U.S. officials to begin talks on ending the nearly three-year-long conflict.

Oil LCOc1 and European natural gas prices fell TFMBMc1 on Wednesday and Thursday, cooling concerns about inflation and helping pull yields lower.

Germany's 10-year bond yield DE10YT=RR, the benchmark for the euro zone, was last down 3 basis points (bps) at 2.455%. It rose 12 bps over the previous two sessions to its highest in almost two weeks, partly driven by strong U.S. inflation data on Wednesday. Yields move inversely to prices.

Weak industrial data was also adding to the downward pressure on yields, with figures on Thursday showing production shrank more than expected in December.

Hauke Siemssen, rates strategist at Commerzbank, said bond prices were stabilising after coming under pressure in part due to large amounts of issuance in the last few days, including syndications from the European Union, France and Italy.

He said the potential for German bonds to rally on the back of Ukraine peace talks is limited, given that the improvement in investor sentiment would tend to favour stocks.

"Bunds look set to enter calmer waters with the duration-intensive euro (bond) supply out of the way for the rest of the week and the data calendar also thinning out," he said. "Duration" denotes longer-dated bonds.

The two-year German bond yield DE2YT=RR, which is more sensitive to European Central Bank interest rate expectations, was 1 bp lower at 2.126% after rising 11 bps over the last two sessions.

Traders on Thursday very slightly added to their bets on further ECB cuts this year and now see around 77 bps of reductions by the end of 2025.

Italy's 10-year yield IT10YT=RR was down 5 bps at 3.513%, and the gap between Italian and German bond yields DE10IT10=RR narrowed 2 bps to 106 bps.