Euro zone yields steady as traders shrug off Trump, reflect on economy

April 22 (Reuters) - Euro zone government bond yields steadied on Tuesday as traders returning from the long weekend reassessed their outlook for the economy after the European Central Bank's rate decision on Thursday and comments that U.S. tariffs would knock growth.

Investors were also digesting U.S. President Donald Trump's Monday warning that domestic growth could slow unless the Federal Reserve cut interest rates immediately, which triggered a sell-off in long-dated Treasuries.

German 10-year bond yields DE10YT=RR, the benchmark for the euro zone bloc, inched up 0.5 basis points to 2.47%. Italy's 10-year yield IT10YT=RR was 1.4 basis points higher at 3.66%.

Trump repeated his criticism of Fed Chair Jerome Powell, who says rates should not be lowered until it is clearer Trump's tariff plans won't lead to a persistent surge in inflation.

The spread between U.S. 10-year Treasuries and German Bunds DE10US10=RR widened to 195 bps. The premium investors demand to hold U.S. debt rather than German has increased by 48 basis points so far in April, heading for its biggest monthly rise since June 2003, according to LSEG data.

Germany's two-year bond yield DE2YT=RR, which is more sensitive to ECB rate expectations, extended its slide on Tuesday, falling by 2.9 bps to 1.64%.

It dropped about 7 bps on Thursday after investors priced in more rate cuts by the ECB after the central bank lowered interest rates to 2.25% last week.

Trading resumed on Tuesday after Easter holidays on Friday and Monday.

Markets are currently pricing in the ECB's main rate at roughly 1.6% in December, up slightly from the roughly 1.57% seen on Thursday. EURESTECBM6X7=ICAP