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UPDATE 3-Germany bund yields track U.S. Treasuries lower after Powell comments

Virginia Furness

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* German 10-year bund comes off day's high after Powell comments

* Powell acknowledges key risks to U.S. economy, says Fed will 'act as appropriate'

* Better French industrial data drives up bond yields

* Germany new bond sale underwhelms (Updates prices)

LONDON, July 10 (Reuters) - German 10-year government bond yields came off the day's high on Wednesday after U.S. Federal Reserve Chairman Jerome Powell highlighted concerns about trade tensions and a weak global economy, bolstering expectations that the Fed will cut interest rates later this month.

In prepared remarks, Powell said that the Federal Reserve stands ready to "act as appropriate" to sustain a decade-long expansion. He said U.S. economic growth was being weighed down by a considerable set of risks - including persistently weak inflation, slower growth in other major economies, and a downturn in business investment driven by uncertainty over global trade tensions.

German government bond yields fell around 3 basis points after the speech to -0.315% and closed the day at around -0.31% having hit a 10-day high of -0.279% earlier in the session after better than expected French industrial production data.

Other euro zone bond yields also came off their day's high.

Investors sold German Bunds aggressively after the French industrial output data. That pushed Germany's 10-year bund yield up seven basis points to -0.279%, its biggest one-day move since June 2018.

Analysts attributed the move partly to the French data. French industrial output rose 2.1% in May, its biggest monthly increase since November 2016.

"There were good numbers in France this morning, so there's some return to risk appetite," said Jean-Christophe Machado, rates strategist at Natixis. "But the reaction is a bit extreme ...Bunds are expensive ... maybe there's some profit taking ahead of the Fed."

In a sign that investors are showing frustration with the super low yields on offer, a German 10-year Bund sale failed to drum up enough demand to cover the targeted 4 billion euro deal size.

Germany's debt management office sold 3.155 billion euros of 0.00% 10-year Bunds, holding on to 845 million euros.

Markets on Friday scaled back expectations of deep rate cuts by the Fed after better-than-expected U.S. jobs data.

Markets are now pricing in a 25-basis-point cut at the Federal Open Market Committee's next session on July 30-31. But the potential for disappointment is high, said Christian Lenk, rates strategist at DZ Bank.

"It will be pretty hard for Powell to meet all the expectations that are in the market," he said. "If you look at the fundamentals, the situation in the U.S. is not that bad that would justify a long series of rate cuts."

In a Q&A session on Twitter on Tuesday, the European Central Bank's chief economist, Philip Lane, reiterated that the ECB has the tools it needs to keep inflation on track towards its goal of just under 2 percent.

Risk appetite may also grow after U.S. and Chinese trade officials held a "constructive" phone conversation on Tuesday, according to White House economic adviser Larry Kudlow, marking a new round of talks after the world's two largest economies agreed to a truce in a year-long trade war.

Italy on Tuesday sold a 50-year bond with more than 80% of demand coming from foreign investors, led by Germany, the head of its debt management office told Reuters.

(Reporting by Virginia Furness Editing by Larry King and Frances Kerry)