LONDON, Feb 21 (Reuters) - Euro zone bond yields held

steady on Friday but were on track for their biggest weekly rise

since early January as investors price in the likely need for

more borrowing to fund higher defence spending.

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

the euro zone bloc, fell 0.7 basis points to 2.526%. Yields move

inversely to prices.

Benchmark German yields have risen around 11 bps this week

after U.S. President Donald Trump shocked allies by initiating

talks with Russia over ending the Ukraine war. Figures in his

administration have said Europe will have to shoulder more of

the security burden.

That implies higher spending on defence and so higher

borrowing via bond markets, adding to upward pressure on yields.

Italy's 10-year yield was lower by 1.1 bps at

3.605%, and the gap between Italian and German yields

stood at 108 bps.

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

sensitive to European Central Bank rate expectations, was little

changed at 2.146%.