* Bond yields edge up, take cue from improving risk sentiment
* Bund yields 6 bps above 7-week lows hit last wk
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By Dhara Ranasinghe
LONDON, Nov 1 (Reuters) - Euro zone government bond yields nudged higher on Thursday as rallying stock markets and upbeat noises on Brexit talks dimmed the appeal of fixed income assets.
Sterling jumped 1 percent against the dollar after reports that a deal is nearly done that would give UK-based financial firms some form of access to European markets when Britain leaves the European Union.
This, together with a firm start to November for equity markets after a torrid October, gave some steer to European bond markets, although trade was generally subdued due to holidays in much of the region for All Saints’ Day.
“Risk appetite is quite important at the moment,” said Jan von Gerich, chief analyst at Nordea.
Germany’s benchmark 10-year bond yield rose 2 basis points to 0.405 percent — around six bps above seven-week lows hit last week at the height of a selloff in world stocks. October was the worst month for European stock markets since January 2016.
Across the single-currency bloc, most 10-year debt yields were 1-2 bps higher on the day.
But Italian bond yields — which tend to move closely with rises and falls in risk sentiment — fell.
Dialogue between Italy and the European Commission over the country’s budget plans will not be an “exchange of concessions”, Prime Minister Giuseppe Conte told Corriere della Sera in an interview published on Thursday.
Analysts said that having benefited from month-end demand and heavy bond redemptions this week, euro zone debt markets were now more vulnerable to other factors such as a pick-up in risk sentiment and the upward pull from U.S. Treasury yields.
U.S. bond yields rose on Wednesday as Wall Street shares put in a strong performance and economic data pointed to further signs of strength in the labour market - potentially setting the tone for Friday’s closely-watched non-farm payrolls report.
“There is a bit of profit-taking on long positions in euro zone bonds,” said René Albrecht, rates strategist at DZ Bank.
“There isn’t much space for lower or deeper bond yields - inflation is returning and the ECB is ending its asset purchases.”
Reporting by Dhara Ranasinghe Editing by Gareth Jones