(Updates prices)

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Trump's retreat from tariffs over Greenland reassures

market

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Japanese bonds have rallied over last two sessions

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Germany's 10-year yield set for fall after five sessions

of

gains

LONDON, Jan 22 (Reuters) - Euro zone bonds steadied on

Thursday with longer-dated bond yields dropping slightly

relative to shorter-dated ones after an easing in ‌geopolitical

tensions and Japanese bond market turmoil.

A plunge in Japanese bonds, as well as U.S. President Donald

Trump's threats ​to impose tariffs as leverage to seize Greenland

contributed to a global bond ‍selloff on Tuesday, particularly in

longer-dated bonds.

However, Trump abruptly changed ⁠stance and Japanese government

bonds ⁠have also rallied for the last two sessions.

That has helped at least to put a floor ‌under euro zone bond

prices.

GERMANY'S 10-YEAR YIELD HEADS ​FOR FALL AFTER FIVE INCREASES

Germany's 10-year yield, the euro zone benchmark, was down

just over one basis point at 2.86%, in what ⁠would be its first

fall after five ‍straight sessions ​of increases.

Yields on super-long 30-year German debt, which had risen more

sharply earlier in the week, fell around 2 bps to 3.49%. while

the two-year yield ‍was up one basis point at 2.09%

Those "bull flattening" moves in market parlance are a

reversal of the "bear steepening" situation earlier in the week

when longer-dated yields rose while shorter-dated ones held

steady or even fell, as worries about the impact of U.S. tariffs

and a possible response by the EU weighed.

The de-escalation over tariffs ​means "concerns ‍are dialled back

on euro zone inflation and GDP growth. This neutralises the

'bear steepening' trades in Treasuries and (German) Bunds,"

analysts at Societe Generale wrote in ​a note.

A less tumultuous Japanese government bond market added to

the calmer mood. Super-long-dated Japanese government bond

yields dropped around 6 basis points on expectations that the

finance ministry could take some measures to contain further

rises in yields.

Other euro zone bonds slightly outperformed the German

benchmark on Thursday, again reversing the moves earlier in the

week.

French and Italian 10-year yields were each ​down around 2 basis

points each at 3.51%.

Euro zone markets saw little immediate impact from sharp moves

higher in British government bond yields on speculation Andy

Burnham, a rival to Prime Minister Keir Starmer, would ‍return to

the British parliament.