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UPDATE 1-Euro zone bond yields steady before consumer confidence data

Yoruk Bahceli

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

LONDON, Dec 20 (Reuters) - Germany's 10-year government bond yield held steady near six-month highs on Friday before the release of euro zone consumer confidence data.

Bond yields have risen this week, following the release of better-than-expected business confidence data and an interest rate increase by the Swedish central bank that ended negative rates, causing speculation about the European Central Bank's policy next year, where the key interest rate is at minus 0.5%.

"There is no convincing single reason for this movement in yields," UniCredit analysts said in a note sent out to clients.

"The most likely explanation is a mixture of uncertainty regarding the monetary policy outlook for next year ... improving sentiment and profit taking after a strong year-to-date performance and ahead of the year end."

Analysts also stressed that thin year-end trading volumes meant it took little to move markets.

Market sentiment saw a boost after U.S. Treasury Secretary Steven Mnuchin said on Thursday that the United States and China would sign phase one of their trade agreement in early January.

Mnuchin said the documentation was completely finished and just undergoing a technical "scrub", though Beijing has so far dodged all details of the deal.

Most 10-year bond yields were unchanged in early trade , with Germany's benchmark at -0.231%, off Thursday's six-month high at -0.208%.

Italian yields gained, with the 10-year bond rising 2 basis points to 1.414%. Data on Friday showed that morale among Italian businesses and consumers improved in December.

The "flash" euro zone consumer confidence reading is due at 1500 GMT. A minus 7 reading is expected by a Reuters poll, a marginal improvement on last month's figure.

It follows Germany's Ifo business sentiment survey on Wednesday, which beat expectations and implied growth of 0.2% in the fourth quarter for the euro zone's largest economy .

Investors will also be watching the final U.S. gross domestic product reading due at 1330 GMT.

(Reporting by Yoruk Bahceli, editing by Larry King and Nick Macfie)