* Italian bond yields mostly steady
* 10 year German Bund yields hit two week lows
* Lira and rouble weakness fuel risk aversion
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Updates price moves, adds comments, detail)
By Dhara Ranasinghe and Virginia Furness
Aug 9 (Reuters) - Euro zone bond yields inched down on Thursday as risk aversion gripped world markets and boosted demand for fixed income, with Italian bonds steadier after wild swings in the past week.
Long-dated yields on safe-haven German bonds touched a two-week low as European stocks struggled with trade war worries, Russia’s rouble tumbled after the United States imposed fresh sanctions on the country and Turkey’s lira dropped to a new low.
In regional bond markets, Italy remained in focus.
Contrasting comments by government officials have led to swings in Italian yields as investors try to assess whether the country’s 2019 budget will clash with European Union rules on fiscal discipline.
On Thursday, Italy’s Deputy Prime Minister Luigi Di Maio said he was confident that in coming months the country will win EU backing for greater budget leeway.
Italy’s anti-establishment coalition government, which took office in June, has ambitious spending plans that have raised concerns on financial markets.
“We will get a lot of rhetoric and mixed messages depending on the audience and who’s talking,” said Chris Scicluna, head of economic research at Daiwa Capital Markets.
“So we’ll have to look at the detail and what comes out of the budget talks.”
Italian bond yields opened higher on Thursday but most had moved down as the session wore on, marking a recovery from a selloff late on Wednesday.
Two, five, and 30-year Italian bonds yields were roughly two basis points lower each on the day.
But the 10-year yield was about 2.5 percent higher at 2.9 percent, reflecting some caution in markets.
That left the Italian/German 10-year bond yield gap at around 251 basis points, about 10 bps wider than levels touched on Wednesday.
“Italian BTPs are recovering a bit after yesterday’s moves,” said Cyril Regnat, a fixed income analyst at Natixis.
“But we’re not far from 260 bps on the Italian/German yield spread, so it is still wide.”
Outside Italy, most 10-year bond yields were slightly lower on the day against a backdrop of global risk aversion.
Germany’s benchmark Bund yield dipped to a two-week low at 0.38 percent.
Threats to global growth are growing as the risk of protectionism and higher U.S. tariffs sap confidence, the European Central Bank said in a regular economic bulletin on Thursday.
Also in focus for euro zone bond investors is the auction of 30-year U.S. Treasury bonds, following the successful sale of $26 billion 10-year debt on Wednesday.
Reporting by Dhara Ranasinghe and Virginia Furness; Editing by Susan Fenton
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