Euro zone yields edge down, investors eye US inflation data, heavy bond sales

LONDON, Sept 22 (Reuters) - Euro zone government bond yields edged down on Monday trade, as investors awaited data on the Federal Reserve's preferred inflation gauge in a heavy week for bond sales.

Yields climbed last week after Germany unveiled plans to increase debt issuance and following policy decisions from the Federal Reserve and the Bank of England.

This week's U.S. data will be in focus, particularly Friday's release of the personal consumption expenditures (PCE) price index, a key input for shaping expectations on the Fed’s next policy steps.

Several Fed policymakers are also scheduled to speak in the coming days, while the Swiss National Bank meets on Thursday, with markets betting it will keep its benchmark rate unchanged at 0%.

Germany's 10-year bond yield DE10YT=RR, the benchmark for the euro zone, was down 1 basis point at 2.7362%, while the U.S. 10-year Treasury yield US10YT=RR was down 1 basis point at 4.1274%.

"A hawkish Fed has taken away the downward pressure on U.S. Treasury yields, which in our view opens the door to a stretch higher in euro rates," ING said in a note.

Pan-European stock market operator Euronext ENX.PA announced on Monday the launch of a new series of futures products for Europe's main government bonds, such as France's 10-year OAT, the German Bund, and Italian government bonds.

Euronext said the new products would not only help investors deal with a period of high volatility in the European bond markets, amid political uncertainty in France and Germany's plans to ramp up debt issuance, but would also form a key part of Euronext's overall growth strategy.

There will be around 30 billion euros ($35.26 billion) worth of bond sales this week, including new 30-year debt from the Netherlands and 10-year Italian paper, according to Commerzbank.

French 10-year yields FR10YT=RR were down 0.9 basis points to 3.5482%, while Italy's 10-year yield IT10YT=RR was down 1.4 basis points at 3.5351%.

French yields briefly traded above Italian yields last week for the first time, following a ratings downgrade of France's long-term creditworthiness.

"Bearish momentum may persist this week amid upbeat macro data and heavy supply, while recent rating actions support further convergence between Italian government bonds and French government bonds," Commerzbank said in a note.

At the longer end of the curve, Germany's 30-year bond yield DE30YT=RR decreased 0.8 basis points to 3.3331%, while Italy's 30-year bond yield IT30YT=RR was down 1.2 basis points at 4.5016%.

Italy won a clear rating boost on Friday when Fitch upgraded the creditworthiness of the euro zone's third-largest economy reflecting the country's political stability and improving public finances under the government of Giorgia Meloni.

($1 = 0.8508 euros)