Euro zone yields inch lower, investor eyes remain on Paris

LONDON, Oct 8 (Reuters) - Euro zone bond yields inched lower on Wednesday, with the mood much calmer than earlier in the week when developments in French and Japanese politics sent yields higher worldwide, though investors maintained a wary eye on developments in Paris.

France's 10-year bond yield was down nearly 2 basis points at 3.55% after trading just shy of 3.6% on both Monday and Tuesday, when investors reacted to the resignation of Prime Minister Sebastien Lecornu, France's fifth prime minister in less than two years. FR10YT=RR

Germany's 10-year yield was down around 1 bp at 2.7% DE10YT=RR, leaving the closely watched gap between French and German yields at 85 bps down from nearly 88 bps on Monday. FR10DE10=RR

Investors remain focused on France however, with no end in sight to the political chaos. President Emmanuel Macron is now facing growing pressure to resign or hold a snap parliamentary election.

Also in the mix on Wednesday was data showing German industrial output fell much more than expected in August due to a sharp decrease in production in the car industry.

Japanese government bonds were also calmer on Wednesday following a tumultuous few days as speculation swirled about the course of the nation's fiscal policy. JP/