Euro zone bond yields at multi-month lows as investors track ECB chatter, geopolitics

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Lagarde plans to complete ECB term amid succession speculation

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German 10-year yields decline for second week

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Euro area bonds outperform US Treasuries

(Adds Iran proposal in paragraph 4, moves in US Treasuries in paragraph 10)

By Amanda Cooper and Stefano Rebaudo

LONDON, Feb 20 (Reuters) - Euro zone government bond yields headed ?for a second straight weekly decline on Friday, in a ?week marked by speculation over the leadership of the European Central Bank and by rising geopolitical tensions between the U.S. and Iran.

The bloc's ?bonds continued to outperform U.S. Treasuries, whose yields rose after the U.S. Supreme Court struck ?down President Donald Trump's use of emergency powers to impose sweeping tariffs, a ?ruling that injected uncertainty ?into future federal government revenues.

German 10-year yields were set for a decline of 2 basis points this week, which on the back ?of last week's 9-bp drop, brings the fall for ?February so far to 11 bps, the most since April last year.

The 10-year Bunds, a reference point for the wider euro zone market, were last yielding 2.74%, ?down around 0.5 bps on the day and just ?above this ?week's 2-1/2-month low of 2.725%.

ECB President Christine Lagarde told the Wall Street Journal on Thursday she expected to complete her eight-year term at the head of the central bank, following ?a report earlier in the week she was planning to step down.

That story, reported ?by the Financial Times on Wednesday, added impetus to the race to succeed Lagarde, bringing potential uncertainty to the ECB, which markets expect to hold interest rates at 2% for an extended period. At the same time, investors are keeping a close eye on the Middle East, where a massive U.S. military ?buildup is ?fuelling fears of a wider war. Iran's foreign minister said on Friday ?he expected to have a draft counterproposal ready within days following nuclear talks this week as U.S. President ?Donald Trump said he was considering limited military strikes.

On the economic front, euro zone business activity accelerated faster than forecast this month.

EURO AREA BONDS OUTPACE US TREASURIES

Some analysts said Bunds' outperformance of U.S. Treasuries in recent sessions reflected a view that German debt offers greater safety in the event of Iran-related turmoil.

Yields on Italian BTPs and other euro zone bonds, including those of France and Spain, are also hovering around multi-month lows, having outpaced ?Treasuries too.

The 10-year U.S. Treasury yield rose 1.5 bps to 4.09%.

Italian 10-year yields were down 1.5 bps on the day at 3.35%, after hitting 3.344%, their lowest in four months. French 10-year debt yields ?were also down 1.5 bps at 3.301%, their lowest ?in over six months. (Reporting by Amanda Cooper and Stefano Rebaudo; editing ?by Mark Potter and Emelia Sithole-Matarise)