May 16 (Reuters) - Euro zone government bond yields

dropped on Friday, backing further away from multi-week highs

hit earlier this week as investors awaited further trade

developments after risk appetite sparked by a de-escalation in

the Sino-US trade war faded.

German 10-year bond yields, the benchmark for

the euro zone bloc, fell 3.3 basis points to 2.59%, but were

still headed for their fourth consecutive weekly rise,

reflecting the investor push away debt. Bond yields move

inversely to prices.

The United States announced trade deals with the UK and

China this month, allaying fears of a recession caused by the

trade war, which lessened demand for safe-haven assets that sent

U.S. and euro zone yields to one month highs this week.

However, a raft of soft data on Thursday indicated the

world's largest economy slowed last month, prompted traders to

up their bets on interest rate cuts from the Federal Reserve and

sent U.S. 10-year Treasury yields 7 bps lower.

The yield on the U.S. 10-year Treasury bond was down 4.7 bps

at 4.40% in Europe on Friday.

Germany's two-year bond yield, which is more

sensitive to European Central Bank rate expectations, was down

1.8 bps at 1.865%.

Italy's 10-year yield fell 3.4 bps at 3.6%, and

the gap between Italian and German bunds narrowed

1.5 bps to 100.7 bps.