Euro zone bond yields drop as recession fears drive investors to safe havens

April 4 (Reuters) - Euro zone government bond yields headed for their largest weekly drop since last November on Friday as investors sought safe havens after far-reaching U.S. tariffs darkened the outlook for the global economy and deepened fears of a recession.

Countries around the world threatened retaliation after U.S. President Donald Trump's tariffs fed expectations for a global downturn and for sharp price hikes in the world's biggest consumer market.

That caused a sell-off in stocks as investors sought the relative safety of government bonds and other assets such as gold.

The German 10-year bond yield DE10YT=RR, the benchmark for the euro zone bloc, fell 4.4 basis points to 2.597%. Yields were set for a weekly decline of 15 bps, the most since November last year.

Italy's 10-year yield IT10YT=RR was lower by 3 basis points at 3.739%, and the gap between Italian and German 10-year bond yields DE10IT10=RR widened to 114 bps.

The French 10-year yield FR10YT=RR fell 2.2 bps to 3.346%.

All three 10-year yields continued their slide from Thursday and were at their lowest since early March, before Germany announced its massive spending and fiscal plans that drove euro zone bond yields higher.

Germany's two-year bond yield DE2YT=RR, which is more sensitive to ECB rate expectations, was down 2.8 bps at 1.903%. It was at its lowest since December.

Markets are pricing in a roughly 70% chance of a 25 bps rate cut by the European Central Bank in April, as trade disputes are expected to take a toll on economies.