European bond yields slip ahead of second day of US-China trade talks

By Linda Pasquini

June 10 (Reuters) - Euro zone government bond yields were little changed on Tuesday, continuing the previous day's stability, as markets eyed a second day of trade talks between the United States and China.

Traders will also focus on a host of European Central Bank officials speaking this week after the central bank cut interest rates last week by 25 basis points to 2%, as expected, but signalled it may be closer to the end of its easing cycle than many had expected.

Germany's 10-year yield DE10YT=RR, the benchmark for the euro zone, was down 3 basis points at 2.542%.

Two-year German yields DE2YT=RR also fell 3 bps to 1.846%, while 30-year yields were down at 3.008%.

Ten-year Italian yields IT10YT=RR slipped 2 bps to 3.482%, leaving the gap between German and Italian yields DE10IT10=RR at 91.90.

ECB officials speaking this week include board member Isabel Schnabel, with comments from policymakers Peter Kazimir and Robert Holzmann on Monday supporting the view that an end to rate cuts may be approaching.

Elsewhere, Japan's super-long government bond prices rose on Tuesday, after Reuters reported the government is considering buying back some super-long-dated bonds in a move to contain rising yields.

Investors will also be looking for any impact from tariffs in inflation data out of the U.S. this week.

"Although the outlook for the euro zone is currently much more favourable, the Bund future was brought back down to Earth (last week) by a surprisingly hawkish ECB press conference and robust U.S. labour market figures," analysts at Frankfurt-based Metzler wrote in a note to clients.

"Given that the ECB itself expects inflation to reach 1.6% next year, we anticipate some downside potential at both the short and long ends of the yield curve for the time being."