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Euro zone bond yields creep higher

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US curve steepens overnight

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Trump tariff threat on EU in focus

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Dutch pension reform headlines weigh on long-end

(Updates prices, adds quotes from strategist, ECB comments)

By Amanda Cooper and Lucy Raitano

LONDON, July 11 (Reuters) - Euro zone yields edged up on

Friday, as traders awaited U.S. President Donald Trump's tariff

decision for the European Union, after his surprise move to hit

major trading partner Canada with a 35% duty.

Trump's letter to the EU announcing the tariff rate is

likely to land on Friday.

Evelyne Gomez-Liechti, multi-asset strategist at Mizuho

International, said euro zone bond yield moves showed some

spillover from a steepening of the U.S. curve overnight.

German two-year yields were up 1.2 basis points

to 1.903%, while those on the benchmark 10-year Bund

were up 1.6 bps to 2.68%.

"There is uncertainty on what exactly the EU is going to get

... risk assets are not liking that," said Gomez-Liechti,

highlighting European equities, which were down 1% at 1030 GMT.

Friday's cautious mood notwithstanding, Bund yields were

heading for a weekly rise of nearly 12 bps, their largest since

early March, when the German government unveiled the biggest

overhaul in its borrowing rules in modern history.

Even with the concern about the hit to the export-driven EU

economy from U.S. tariffs, the worry about how much extra debt

European governments will have to issue to fund their pledges to

spend big on defence and infrastructure is winning out right now

at the longer end of the bond curve, analysts said.

"We maintain the view of staying away from the long end in

US, Europe and the UK given fiscal concerns. Thus, all our long

positions are focused towards the 5-year sector of the curve,"

Jefferies strategist Mohit Kumar said in a note.

Germany's 30-year bund yield was last up 2 bps

to 3.218% - its highest since March and also on track for its

biggest weekly rise since March.

The Financial Times on Thursday reported that Dutch pension

funds were set to sell 125 billion euros in government bonds,

something Kumar said had been "widely telegraphed" but

nonetheless had knocked longer-dated paper.

Mizuho's Gomez-Liechti said the long-end part of the curve

was not offering enough yield to attract buyers.

Dutch pension funds make up 40% of the euro zone private

pension industry, making them influential bond investors.

In other markets, Italian 10-year BTP yields

were up 2 bps at 3.602%, while 10-year French yields

were up 1.3 bps at 3.404%.

Less than two weeks remain before the European Central

Bank's next meeting on July 23.

On Friday, ECB governing council member Fabio Panetta said

the ECB should continue to loosen monetary policy if threats to

economic growth from international trade tensions and

geopolitical instability boost current disinflationary trends.

Elsewhere, ECB board member Isabel Schnabel was quoted in an

interview as saying the hurdle for another ECB rate cut was

"very high" as the euro zone economy is holding up better than

expected despite uncertainty over trade.