UPDATE 2-Brexit progress takes shine off safe-haven euro zone bonds

* Britain, EU make progress in Brexit talks

* Congress averts U.S. government shutdown for now

* Euro zone bond yields broadly higher

* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr (Updates prices, adds quotes)

LONDON, Dec 8 (Reuters) - Borrowing costs across the euro zone rose on Friday as a breakthrough in divorce talks between Britain and the European Union took the shine off safe-haven bonds.

The European Commission said on Friday enough progress had been made in Brexit negotiations with Britain for a second phase of negotiations to begin, ending an impasse over the status of the Irish border.

In the United States, meanwhile, Congress moved rapidly on Thursday to send President Donald Trump a short-term funding bill to avert a government shutdown this weekend.

That set the backdrop for world markets, with investors dumping safe-haven bonds and snapping up risk assets.

Germany's 10-year bond yield rose 1 basis point to 0.30 percent, up slightly from three-month lows hit this week at 0.29 percent.

"Bund yields had slipped below 30 basis points this week, so prices were already at high levels and that was in part because of risk aversion," said Daniel Lenz, rates strategist at DZ Bank.

"Now that risk aversion is abating as we see the first breakthrough in Brexit negotiations. We also appear to have a solution to U.S. budget talks."

Britain's 10-year bond yield jumped up 7 basis points to 1.32 percent in early trade before settling back down at 1.27 percent by late afternoon.

Most other long-dated bond yields in the bloc finished the day at 1 to 2 bps higher. Peripheral bonds , which tend to benefit from a pick-up in risk appetite, outperformed their higher-rated peers and were 2 to 3 bps lower.

November U.S. labor data showed that job growth in the worlds biggest economy increased at a strong clip in November but wage growth was a touch lower than expected.

"Because the average hourly earnings were lower than expected, we saw a bit of downward pressure on yields. I think it is more important than the jobs number, as it is a leading indicator of inflation," said Mizuho strategist Antoine Bouvet.

The yield on 10-year U.S. Treasuries also dipped slightly before rising again on this mixed picture.

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

(Reporting by Dhara Ranasinghe, Additional reporting by Abhinav Ramnarayan & Fanny Potkin; Editing by Gareth Jones)