* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr
By Dhara Ranasinghe
LONDON, Sept 27 (Reuters) - Government bond yields in the euro area edged lower on Friday and were set for a second week of falls as concerns about a weak economy and political uncertainty in Britain and the United States continued to support debt markets.
French and Spanish 10-year bond yields are down 7-12 basis points this week, on track for their biggest weekly falls in six weeks .
Dismal business activity data from the euro area, especially powerhouse economy Germany at the start of the week, has pushed yields across the bloc to their lowest since the European Central Bank unleashed fresh stimulus on Sept. 12.
The Bank of England may well need to cut rates in the likely scenario that high levels of Brexit uncertainty persist, BoE policymaker Michael Saunders said on Friday in the first clear signal that the central bank is considering a rate cut.
As Britain's 10-year gilt yield fell to its lowest since Sept. 4 at 0.47% after the comments, euro zone bond yields fell too.
Germany's 10-year bond yield was last down 1 bps at -0.59% .
ECB chief economist Philip Lane told Handelsblatt newspaper in an interview published on Thursday that the euro zone economy was undergoing "a temporary weakness, but there is no recession and the risk of deflation is currently small."
An impeachment enquiry into U.S. President Donald Trump and Brexit uncertainty have also renewed support for bonds this week, while a ratings upgrade for Spain has seen its debt market outperform.
Spain's 10-year bond yields were 3 bps lower on Friday at just 0.13% - not too far off sub-zero yield territory.
Even signs that the bloc's biggest economies are loosening their purse strings failed to push bond yields significantly higher.
Presenting France's 2020 budget late on Thursday, Finance Minister Bruno Le Maire said taxes would be cut by more than 10 billion euros ($10.9 billion) next year and Germany should follow Paris' footsteps with fiscal stimulus to revive its flagging economy.
"There is a head of steam behind some fiscal easing but even in Germany, the numbers being talked about are not big in terms of the bond market," said Lyn Graham-Taylor, a fixed income strategist at Rabobank. (Reporting by Dhara Ranasinghe; Editing by Susan Fenton)