By Amanda Cooper LONDON, Oct 16 (Reuters) – Euro zone bond yields edged up on Wednesday, breaking a four-day rally in prices that has driven borrowing costs to their lowest in months, with France in focus ahead of a confidence vote for Prime Minister Sebastien Lecornu and a debt auction later on. Trading in bonds has been dominated this week by renewed concerns about the impact of U.S. President Donald Trump's erratic trade policies on underlying economies, as tensions between Washington and Beijing have heated up. Stocks have stabilised from a sell-off earlier in the week, yet bonds continue to draw in safe-haven flows. BOND RALLY PAUSES Long-dated bonds, which have generally been hit harder this year than shorter maturities by concerns about long-term government finances, have also attracted demand. In terms of benchmark 10-year debt, German Bund yields are set for their fourth weekly decline, the longest such stretch since late March, having fallen for four straight days to their lowest in more than three months. On Thursday, yields were up 1.8 basis points at 2.576%. In addition, ING strategist Michiel Tukker says smaller sales of government bonds over the coming weeks could also be playing a role in the decline in yields. "Bund yields are falling by more than equities would justify. From the demand side, we may have more investors seeking safe havens from market turmoil, whilst from a supply perspective, we see very little net issuance in October versus other months," he said. Yields on French bonds, or OATs, are set for their largest weekly fall of 2025, as investors have taken heart from Lecornu's decision to suspend key pension reforms to appease leftist lawmakers, which helps secure his position and may give him a better chance of passing a belt-tightening budget. Benchmark 10-year OAT yields have fallen nearly 12 bps this week, the most in a year, to 3.3623%. They are still among the highest in the euro zone, but have retreated fairly consistently from the multi-month highs of early October around 3.6%. A raft of European Central Bank officials, including President Christine Lagarde, are scheduled to speak on Thursday, which investors will likely monitor for any sign of what to expect for monetary policy over the coming months. The government will auction an estimated 12 billion euros ($14 billion) in inflation-linked OATs as well as nominal bonds. Investors will be watching demand metrics as a means of gauging confidence in France's creditworthiness. ($1 = 0.8582 euros) (Reporting by Amanda Cooper; Editing by Alex Richardson)
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