UPDATE 2-European bond yields slip before policy meetings and tariff deadline

European government bond yields edged lower on Wednesday ahead of a deadline for new U.S. tariffs on Chinese goods this Sunday while U.S. Federal Reserve and the European Central Bank policy meetings kept investors sidelined. Uncertainty ahead of Thursday's British election, which could determine the fate of the country's exit from the European Union, added to a sense of caution in world markets and supported demand for safe-haven bonds. Benchmark 10-year bond yields in Germany fell two basis points to around -0.32%, below a three-week high of -0.26% reached last week. Comparable yields in France and Belgium were down a similar amount.

"It is basically the Fed, ECB and the tariffs that is keeping everybody on edge with all these headlines on the trade front not removing the broader confusion," said Benjamin Schroeder, a rates strategist at ING Bank. Another round of U.S. tariffs on Chinese goods is due to take effect on Dec. 15.

Uncertainty about the outcome of Britain's election rose after pollster YouGov slashed its prediction for the size of the ruling Conservative Party's majority, saying the race had tightened and the party could no longer be sure of victory. The Fed concludes a two-day meeting on Wednesday with last Friday's strong U.S. jobs data in November expected to give the U.S. central bank all the reason it needs not to cut interest rates further.

Strategists at Mizuho expect Fed Chairman Jerome Powell to imply two-way risks to the Fed's outlook. Money markets, meanwhile, expect no change at Thursday's ECB meeting. Signs the worst may be over for the euro zone economy buy the ECB's Christine Lagarde some time, analysts say.

An economic surprise data index for Europe published by Citibank is at its highest level in nearly two years. With currency market volatility near record lows, demand for peripheral European debt remained.

Italy's 10-year bond yield extended this week's falls to a two-week low around 1.30%. "I don't see anything new driving Italian bond yields lower but there has been an underperformance recently," said Rabobank fixed income strategist Lyn Graham-Taylor.