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UPDATE 1-Worries over US politics and policy lift demand for euro zone debt

LONDON, July 12 (Reuters) - Concerns over U.S. Politics and policy helped drive demand back into Euro Zone government bonds on Wednesday, pushing yields down further from multi-month highs hit earlier this week.

Investors were awaiting Congressional testimony by U.S. Federal Reserve chief Janet Yellen, as well as the fallout over a chain of emails that showed President Donald Trump's eldest son welcoming help from a Russian lawyer during his father's 2016 election campaign against Hillary Clinton.

Yellen will testify to Congress on the state of the U.S. economy and markets will be watching the speech closely for any clues on rate hikes and the plan for reducing the Fed's balance sheet.

BBVA strategist Jaime Costero Denche said the tone Yellen adopts on inflation will be key; an upbeat assessment would imply that the Fed is primed to go ahead with unwinding post-crisis monetary stimulus.

"Our expectation going into the auction was that the 60 basis point yield would be a good level for outright investors to enter the market, so I'm not surprised it went well," said Mizuho rates strategist Antoine Bouvet.

READ MORE (Reuters)

  • US stocks solidly higher in midday trading; oil risesChicago Tribune
  • US Stocks Higher Early; Oil RisesDTN The Progressive Farmer (registration) (blog)
  • Worries over US politics and policy drive demand for euro zone bondsDaily News & Analysis
  • GLOBAL MARKETS-Bonds and emerging market currencies' selloff resumesBusiness Insider

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UPDATE 1-Worries over US politics and policy lift demand for euro zone debt


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