Updates

By Samuel Indyk

LONDON, Feb 26 (Reuters) - Euro zone government bond yields fell to multi-month lows on Thursday as risk appetite soured, impacted by heightened U.S.-Iran tensions, wavering sentiment towards the tech sector and jitters around U.S. import tariffs.

Stocks had bounced in Asia but U.S. equities fell sharply at the open, with Nvidia shares dropping following their results.

"Volatility in the equity market has been supporting safe-haven government bonds," Jussi Hiljanen, rates strategist at SEB, said.

"Risks from here are for yields to move higher if the geopolitical situation, particularly in Iran, calms down a bit, but there is a big question mark about what happens there."

The U.S. and Iran held a third round of talks in Geneva on Thursday against the backdrop of a huge U.S. military buildup in the Middle East, with Tehran under pressure to agree a deal on its nuclear programme or face military strikes.

Germany's 10-year government bond yield DE10YT=RR, the euro zone's benchmark, was down 2 basis points at 2.69%, its lowest level since November 28. It was around 2.90% early this month. Bond yields move inversely to prices.

U.S. Treasury yields also fell on Thursday, with the benchmark 10-year US10YT=RR down 2.5 bps at 4.023%.

INFLATION DATA KEY

Markets are turning their attention to February inflation data from a number of euro zone countries on Friday, after January annual inflation for the bloc was confirmed at 1.7% on Wednesday.

European Central Bank President Christine Lagarde said on Thursday that the central bank expects inflation to stabilise at its 2% target in the medium term.

"All the latest comments from the ECB over the last couple of weeks have indicated there is no force within the Governing Council to change direction any time soon," SEB's Hiljanen said.

The ECB has kept its main interest rates on hold since ending a year-long run of cuts in June last year.

Germany's two-year yield DE2YT=RR, which is sensitive to expectations for policy rates, was down 1 bp at 2.041%.

Money markets continue to price in a roughly 30% chance of an ECB rate cut by December. EURESTECBM7X8=ICAP

Italy's 10-year government bond yield IT10YT=RR fell 2 basis points to 3.303%. The gap versus Bunds was 59.50 bps, after falling to 53.50 bps in mid-January, the lowest since August 2008.