LONDON, April 16 (Reuters) - Euro zone bond yields

inched upwards on Tuesday after rising at the start of the week

on the back of strong U.S. data and a fall in demand for safe

assets.

Bond markets have become more volatile in recent days as a

clear divergence has opened up between the U.S. and European

economies, while the rise in tensions between Israel and Iran

has caused investors to switch in and out of government debt,

which is seen as a safe haven during uncertainty.

Germany's 10-year bond yield, the benchmark for

the euro zone, was up 2 basis points (bps) at 2.453%, within the

2.2% to 2.5% range it has traded in since early February. Yields

move inversely to prices.

The yield climbed 7 bps on Monday after March U.S. retail

sales data came in stronger than expected, causing investors to

further trim their bets on Federal Reserve rate cuts this year,

and by extension causing a slight reduction in European Central

Bank rate pricing.

Investors also moved back out of bonds on Monday, having

snapped up safe assets on Friday during uncertainty about Iran's

retaliation for a suspected Israeli strike on its Damascus

consulate.

"Different market analysts are seriously starting to

question if there will be any U.S. rate cuts this year," said

Jussi Hiljanen, head of rates strategy at SEB.

Yet he said European yields have been trading in a range

because "in the ECB Governing Council, all the members seem to

be basically settled on cutting rates in June, so it's now a

question of how many times will they cut rates after June".

The German 2-year bond yield was unchanged at

2.904%, after climbing 5 bps on Monday.

Yields rose slightly after survey data from the ZEW

institute showed that

German business morale

brightened more than expected in April, although they then

fell back again.

Italy's 10-year bond yield was last up 3 bps

at 3.864%. The gap between Germany and Italy's 10-year borrowing

costs was unchanged at 140 bps, up from 115 bps in mid-March

, its lowest in more than two years.

Stronger-than-expected

Chinese economic data

on Tuesday did little to move global bond markets, and was

tempered by signs of weakness in the March figures.

Investors were keeping a close eye on Israel, where

Prime Minister Benjamin Netanyahu has vowed to respond to Iran's

weekend missile and drone barrage. Oil prices were slightly

lower.

Euro zone yields have risen less than those in the U.S. in

recent weeks as investors have bet the Fed will keep interest

rates higher for longer than the ECB.

Germany's 10-year bond yield has risen around 40 bps this

year, while the U.S. 10-year yield has climbed 77

bps.