Euro zone yields ease; US premium over Germany eyes biggest weekly rise since 1990s

By Yadarisa Shabong

April 11 (Reuters) - Euro zone bond yields eased on Friday after a turbulent week as a temporary pause in some of U.S. President Donald Trump's broader tariffs did little to quell market worries about a U.S.-China trade conflict and the risks to the global economy.

As investors sold U.S. bonds and the dollar, the premium that holders of Treasuries demand to hold U.S. debt rather than German Bunds rose by the most in a week since the 1990s.

The German 10-year bond yield DE10YT=RR, the benchmark for the euro zone bloc, eased 4.5 basis points to 2.539%.

Germany's bond market sat out a global selloff on Wednesday, when U.S. yields surged and the gap between the German and U.S. 10-year yields widened.

"If we look at how the German bond market has evolved this week, it's been, I would say, reassuring that it hasn't been fully caught in what's been happening in the global markets and that is kind of an exception," Jan Von Gerich, chief market strategist at Nordea, said.

"The moves that we've seen in other markets haven't really been ... illustrative of a healthy and well-functioning market."

On Friday, selling in U.S. bonds resumed, with the 10-year note yield US10YT=RR rising to 4.39% and the spread between German and U.S. 10-year Treasuries DE10US10=RR widening to 184 bps. It has risen by more than 40 bps in this week alone, its largest such increase in at least 30 years, LSEG data shows.

Bunds are down 2 bps this week, as investors flocked to safe havens beyond the U.S. market, given the aggressive selloff in Treasuries.

Beijing on Friday increased its tariffs on U.S. imports to 125%, hitting back against U.S. President Donald Trump's decision to hike duties on Chinese goods to 145%

Italy's 10-year yield IT10YT=RR was lower by 0.7 basis points at 3.798%. The gap between Italian and German 10-year bunds DE10IT10=RR, a gauge of the premium that investors demand to hold Italian debt, widened to 125 bps.

With higher U.S. tariffs postponed by 90 days, European Union finance ministers will on Friday discuss how to use that time to reach a trade deal with Washington and to coordinate their efforts to handle higher levies if they are unsuccessful.

The European Central Bank, meanwhile, will hold its next policy meeting on Thursday.

Money markets are pricing in a 99% chance the bank will decide on a quarter-point rate cut, and that the main rate will be roughly 1.7% in December. EURESTECBM6X7=ICAP

Germany's two-year bond yield DE2YT=RR, which is more sensitive to ECB rate expectations, was 7.7 bps lower at 1.74%.

German inflation eased to 2.3% in March, the federal statistics office said on Friday, confirming preliminary data.