* U.S. yields, dollar fall after bill collapses
* Investors temper expectations for Trump's spending plans
* Yields fall across bloc, especially in periphery
* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr (Updates prices)
LONDON, July 18 (Reuters) - Europe's benchmark bond yields edged down on Tuesday, tracking U.S. equivalents after the collapse of a second healthcare bill in the U.S. Senate showed the difficulties President Donald Trump faces passing his ambitious spending plans.
Yields across the globe rose sharply after Trump won the U.S. election in November on promises for tax reforms and infrastructure investment that were expected to boost growth and inflation in the world's largest economy. Analysts called this the 'Trump trade'.
However, for most of this year, yields have been grinding lower as investors tempered their initial expectations both for the speed at which Trump's plans can be implemented and the pace of monetary tightening by the U.S. central bank.
"It is further evidence that not much will come from (Trump's) pro-growth policy that he pledged when he came to power. The market reaction is consistent but it is fairly small, suggesting a lot of this had already been priced in," KBC strategist Piet Lammens said.
The announcement on Monday that two Republican Senators would not support the latest version of the healthcare bill - meaning it does not have enough votes to pass - was yet another blow for Trump.
U.S. 10-year bond yields and the dollar immediately fell after the news.
German 10-year yields fell 3 basis points to 0.56 percent during European trading on Tuesday. They briefly touched an 18-month high on Tradeweb's trading platform, however this was down to an overnight change in the bond used as the benchmark.
Yields on lower-rated bonds fell even further, with Spain's 10-year yield dropping 7 basis points and closing the gap to German equivalents to levels not seen since September.
Analysts said falls should be kept in check by upcoming supply which tends to put upward pressure on yields as investors sell outstanding bonds to make room in their portfolios for new debt.
Europe's bailout fund - the European Financial Stability Facility - is set to sell a new 10-year bond and tap a 30-year bond on Tuesday, Thomson Reuters' IFR reported.
There is also widespread speculation that Greece will end a three-year exile from markets this week and sell new debt. Greece is said to be looking at selling 2-4 billion euros of five-year bonds.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.bi z / c m s / ? p a g e I d = l i v e m a r k e t s ($1 = 0.8679 euros)
(Reporting by John Geddie; Editing by John Stonestreet and Susan Thomas)