Euro zone bond markets steady as investors trust in orderly Brexit

LONDON, Jan 30 (Reuters) - Euro zone bond yields held firm on Wednesday after British lawmakers voted down a proposal in parliament that aimed to prevent a potentially chaotic "no-deal" Brexit which markets appear reluctant to price in.

Bond investors paused for breath following the vote, and ahead of key euro zone data, the Federal Open Markets Committee press conference, and the resumption of trade talks between China and the U.S., all due later on Wednesday.

British lawmakers on Tuesday instructed Prime Minister Theresa May to reopen a Brexit treaty with the European Union to replace a controversial Irish border arrangement - and promptly received a flat rejection from Brussels.

At the same time, parliament rejected a proposal to stop a potentially chaotic "no-deal" exit by making May ask Brussels for a delay if she cannot get a deal past lawmakers.

The euro zone bond market has grown a little immune to Brexit noise, said Christoph Rieger, rates strategist at Commerzbank.

"Given the UK amendments and what (European Council President Donald) Tusk said, this combination increases the risk of a disorderly Brexit. The market is reluctant to price this scenario," Rieger said. "The market still maintains its faith that reason will prevail. This morning, it looks quite a fantasy to come up with such a scenario."

Investors bought German Bunds in the run-up to Tuesday's vote. German 10-year Bund yields were last trading at 0.192 percent, close to levels traded late on Tuesday.

British 10-year government bond yields fell 1.4 basis points to 1.255 percent in early trade.

But even as Goldman Sachs, as well as others, saw the chance of a no-deal Brexit increasing, euro zone bond yields were largely unchanged.,.

Investors are also focused on upcoming euro zone data and the U.S. Federal Reserve meeting.

"We expect that the meeting will be an opportunity for (Fed chief Jerome) Powell to drive home the Fed's pause message," wrote Mizuho strategists in a note.

Commerzbank Rieger said he expected some balance sheet discussion following reports by the Wall Street Journal that the Fed is considering stopping the balance sheet run down early.

Ahead of German inflation and retail sales data, data showed France's economy performed a little better than expected in the fourth quarter, increasing 0.3 percent.

Stronger growth data may put European Central Bank rate hikes back on the agenda.

Elsewhere, Italian government bond yields were largely unchanged despite reports that deputy prime minister Matteo Salvini is facing pressure to force an early election as senior League figures are frustrated by dealing with its coalition partner, the 5-Star Movement.

Italy's 10-year bond yield gap over Germany briefly touched its tightest level in a month at 240 basis points, before rising to 244 basis points.

Greek 10-year government bond yields extended falls after Tuesday's strong bond sale to their lowest since August at 3.958 percent. Greece sold a five-year government bond via syndication on Tuesday, with demand of over 10 billion euros.