Euro zone yields edge up; Lagarde cites 'global euro moment'

LONDON, June 17 (Reuters) - Euro zone bond yields edge up in early trading on Tuesday, taking their cue from a relatively subdued overnight session in U.S. Treasuries, as fighting between Israel and Iran entered a fifth day.

U.S. President Donald Trump urged Iranians to evacuate Tehran, citing what he said was the country's rejection of a deal to curb nuclear weapons development. His social media post triggered a burst of buying in oil and gold before a greater sense of calm kicked in.

German 10-year yields, which serve as the benchmark for the wider euro zone, rose 2.5 basis points to 2.556%, while two-year Schatz yields rose 1.2 bps to 1.857%.

U.S. Treasury yields fell as much as 3.2 bps to a low of 4.422% in Asia before stabilising around 4.44%. The Federal Reserve is starting a two-day meeting at which it is expected to leave U.S. rates unchanged.

"Everything considered, Bunds look set to underperform U.S. Treasuries and don't appear ripe for 10-year yields below 2.5% with risk sentiment stabilising and domestic headwinds continuing," Commerzbank chief rates strategist Christoph Rieger said.

Meanwhile, European Central Bank President Christine Lagarde said in an opinion piece in the Financial Times that now is a "global euro moment" but added that a step towards greater international prominence for the currency must be earned.

Lagarde cited a number of challenges the European Union faces, one of them structural, as growth remains low, capital markets fragmented and the supply of high-quality safe assets is lagging.

"Recent estimates suggest outstanding sovereign bonds with at least a AA rating amount to just under 50% of GDP in the EU, versus over 100% in the U.S.," she wrote.

Italian bonds, which on Monday outperformed the wider euro zone, surrendered some gains. Yields on the 10-year BTP rose 2 bps to 3.153%, still comfortably in sight of last week's six-month lows.

On the data front, Germany's ZEW economic research institute releases its June index of investor sentiment later. Economists polled by Reuters expect the index to have risen to a three-month high of 35, from May's 25.2. (Reporting by Amanda Cooper; Editing by Kim Coghill)