(Updates in late morning European trading)

By Harry Robertson

LONDON, March 21 (Reuters) - Euro zone bond yields were

set for their biggest weekly fall since November on Friday as

traders mulled the risks of tariffs and a U.S. economic

slowdown, after shooting higher earlier in March on Germany's

spending plans.

Germany's Bundesrat, the upper house of parliament, on

Friday passed the debt rule overhaul and a 500-billion-euro

($542 billion) infrastructure fund, although bonds showed little

reaction to the well-telegraphed event.

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

the euro zone bloc, fell 2 basis points (bps) to 2.761% and was

on track to fall 11 bps for the week. Yields move inversely to

prices.

Analysts at Barclays, Commerzbank and ING said concerns

about U.S. President Donald Trump's April 2 deadline for tariff

decisions were weighing on sentiment and pushing investors

towards the safety of government bonds.

Trump has pledged to put reciprocal tariffs on U.S. trading

partners and, although details are scarce, the moves could knock

European, American and global growth.

"Following the circa 45 bp increase in yields over the

past two weeks, a dovish Fed, passage of the fiscal bill in the

Bundestag... and weaker risk backdrop have helped Bunds regain

some lost ground," said Barclays strategists, led by Rohan

Khanna, in a note.

The U.S.

Federal Reserve

on Wednesday held interest rates but cut its growth

forecasts as it grappled with the uncertainty caused by Trump's

stop-start tariffs.

German 10-year yields nonetheless remain 39 bps higher for

the month after the announcement of the country's new spending

plans - to be funded largely through bond markets - sent yields

soaring.

Italy's 10-year yield was lower by 1 bp at

3.829%, and the closely watched gap between Italian and German

bond yields stood at 106 bps.

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

sensitive to European Central Bank rate expectations, was 3 bps

lower at 2.144%.