LONDON, Oct 8 (Reuters) - Euro zone bond yields inched

lower on Wednesday, with the mood much calmer than earlier in

the week when developments in French and Japanese politics sent

yields higher worldwide, though investors maintained a wary eye

on developments in Paris.

France's 10-year bond yield was down nearly 2 basis points

at 3.55% after trading just shy of 3.6% on both Monday and

Tuesday, when investors reacted to the resignation of Prime

Minister Sebastien Lecornu, France's fifth prime minister in

less than two years.

Germany's 10-year yield was down around 1 bp at 2.7%

, leaving the closely watched gap between French and

German yields at 85 bps down from nearly 88 bps on Monday.

Investors remain focused on France however, with no end in

sight to the political chaos. President Emmanuel Macron is now

facing growing pressure to resign or hold a snap parliamentary

election.

Also in the mix on Wednesday was data showing German

industrial output fell much more than expected in August due to

a sharp decrease in production in the car industry.

Japanese government bonds were also calmer on Wednesday

following a tumultuous few days as speculation swirled about the

course of the nation's fiscal policy.