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Nervous euro zone bond investors await tales from two courts

* Britain to rule if May can start Brexit without parliament

* Italy to review disputed election law

* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr

By John Geddie

LONDON, Jan 24 (Reuters) - Euro zone government bond yields edged lower on Tuesday as investors nervously awaited court rulings that could affect the timing of Italy's next parliamentary election and Britain's departure from the EU.

Britain's Supreme Court is due to rule at 0930 GMT on whether Prime Minister Theresa May can use executive powers to invoke Article 50 of the EU's Lisbon Treaty and begin two years of divorce talks.

If May loses, a more likely eventuality according to legal experts, she must first get lawmakers' approval as leaving the European Union will strip Britons of rights they were granted by parliament.

The case has attracted huge attention from markets, with investors hoping parliament will temper moves towards a "hard Brexit" in which border controls are prioritised over preferential access to the single market.

Also on Tuesday, Italy's Constitutional Court will review a disputed election law that could affect the timing of the next ballot.

Italy has varying electoral laws for the upper and lower houses of parliament that President Sergio Matteralla says must be harmonised before a national vote can be held.

An unambiguous ruling offering a simple solution could open the way for a ballot by June. A more convoluted reading would leave Prime Minister Paolo Gentiloni in charge until the legislature ends in early 2018.

"Today's constitutional court ruling in Italy should set the scene for changes to the electoral law and quite possibly snap elections later this year," ING's global head of debt and rates Padraic Garvey said.

"The Supreme Court in the UK is expected to rule in favour of allowing parliament to vote on the triggering of Article 50. Any ruling that denies parliament a say would be clearly pound-negative according to our FX strategists, with likely spillover effects to European government bonds."

A combination of these events pushed yields on safe haven bonds slightly lower, extending Monday's rally after U.S. President Donald Trump's tough stance on trade injected uncertainty into world markets.

German 10-year bond yields -- the euro zone benchmark -- edged down a touch to 0.30 percent, while Italian equivalents led falls, dropping 2 basis points to 1.99 percent.

The falls came despite upcoming bond sales which usually push yields higher as investors make room for new supply.

Spain is expected to sell a new 10-year bond on Tuesday, having hired a group of banks to manage the syndication on Monday, while France may sell a 22-year Green bond also announced on Monday. At auction, the Netherlands will sell 2-3 billion euros of five-year debt.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Reporting by John Geddie; editing by John Stonestreet)

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