Wires

UPDATE 1-Euro zone bond yields back on the rise before UK's Brexit vote

Yoruk Bahceli

* All eyes on Saturday Brexit vote in UK parliament

* Bond yields rise again

* Analysts expect rally if deal rejected (Updates prices, adds analyst quote, confirmation of Lagarde as ECB head)

LONDON, Oct 18 (Reuters) - Euro zone bond yields resumed their rise on Friday as the British parliament prepared to vote on Saturday for or against an agreement on the United Kingdom's departure from the European Union.

Yields have been rising since Irish and British leaders said on Oct. 10 they saw a path to a Brexit deal, which boosted risk appetite and weakened demand for safe-haven assets like bonds.

EU leaders unanimously backed the new Brexit deal on Thursday, leaving UK Prime Minister Boris Johnson facing a battle to secure parliament's backing if he still hopes to take Britain out of the EU on Oct. 31.

"Today will be all about estimating how likely it is that the British parliament will agree to the Brexit deal tomorrow," UniCredit analysts said in a client note.

European Commission President Jean-Claude Juncker opposed extending the Brexit deadline past Oct. 31, but Donald Tusk, who heads the European Council, which includes the EU heads of state or government, refused to rule out an extension. The EU member states would need to agree an extension.

"It looks like there won't be a no-deal. It looks like the European leaders look open to an extension, despite what Juncker said," said Rabobank fixed income strategist Lyn Graham-Taylor.

Ten-year benchmark bond yields rose 2 basis points on the day, after falling on Thursday following a two-day sell-off. The German bond's yield was -0.38%, its highest since late July.

Analysts largely expect parliament to reject the deal, but the market is "discounting some kind of normal orderly Brexit, maybe at the end of October," said DZ Bank strategist Rene Albrecht.

UniCredit analysts said in a client note they expect 10-year yields to fall about 10 bps if parliament rejects the deal, which would boost demand for safe-haven bonds.

But UniCredit analysts said yields would rise less than 10 bps with a deal, "given the continued weak outlook for global growth and the accommodative stances of the Fed and particularly the ECB".

Rabobank's Graham-Taylor said his base case was that the deal won't pass in parliament, leading to a bond market rally, which would ease if an extension is agreed.

China's economic growth slowed more than expected in the third quarter, to 6.0% year-on-year, the slowest pace in more than 27 years. However, industrial output rose more than expected in September and retail sales rose in line with expectations.

"The Chinese data was a bit of a mixed bag ... I wouldn't describe it as shocking data," Rabobank's Graham-Taylor said.

The downbeat data raised the prospect that Chinese policymakers could prepare more measures to boost growth. But analysts and market players said Beijing has little room to ease.

The European Council confirmed Christine Lagarde's appointment as head of the ECB as of Nov. 1.

(Reporting by Yoruk Bahceli, additional reporting by Elizabeth Howcroft; editing by Larry King)