Euro zone bond yields fall while Bund yields hold below recent peaks

LONDON, Dec 29 (Reuters) - Euro zone ⁠government bond yields ‌edged down on Monday, ⁠with benchmark 10-year German Bund yields holding below recent nine-month highs in ‍trade thinned by the holiday season.

That move followed a decline in U.S. ‍Treasury yields on Friday, when markets across much of Europe were ⁠closed.

In early trade, most 10-year bond yields across the euro area were down about 2-3 basis points (bps) as their prices rose.

Germany's 10-year ​Bund yield fell almost 3 bps to around 2.84%, holding below nine-month highs touched last week. There was some focus on Ukraine. U.S. President Donald Trump said on Sunday that he ‍and Ukrainian President Volodymyr Zelenskiy were moving closer to an ‌agreement to end the war in Ukraine but acknowledged that the fate of the Donbas ‌region remained an unresolved issue.

Investors in European bond markets also have one eye on the Netherlands as a new year approaches. The ‌Dutch occupational pension system, the European Union's largest, will start the transition ​to a new system from January 1, allowing the nearly 2 trillion euro ($2.35 trillion) sector to buy riskier assets.

This could add to pressure ⁠on long-term government bonds that already face ‍reduced demand from big buyers such as central banks and other pension funds.

The German ​10-year bond yield is on track to ⁠end the year about 50 bps higher, set for its biggest one-year rise since 2022 when inflation across major economies surged. (Reporting by Dhara Ranasinghe Editing by David Goodman)