LONDON - Euro zone ​government bond yields headed for ⁠a second straight weekly decline on Friday, in a week marked by speculation over the leadership of ‌the European Central Bank and by rising geopolitical tensions between the U.S. and Iran.

ECB President Christine Lagarde told the Wall Street Journal on ​Thursday she expects to complete her eight-year term at the head of the central bank, following a report earlier in the ​week she was ​planning to step down.

That story, reported by the Financial Times on Wednesday, added impetus to the race to succeed Lagarde, bringing potential uncertainty to the ECB, which markets expect to hold interest rates at ⁠2% for an extended period.

At the same time, investors are keeping a close eye on the Middle East, where a massive U.S. military buildup is fuelling fears of a wider war. President Donald Trump on Thursday warned Iran it must make a deal over its nuclear programme or "really bad things" will happen, while Tehran has threatened to retaliate ​against U.S. bases in ‌the region if ⁠attacked, triggering a rise in ⁠the price of crude this week.

German 10-year yields were set for a decline of 3 basis points this week, which ​on the back of last week's 8-bp drop, brings the fall for February so ‌far to more than 9 bps, the most since April last year.

Benchmark ⁠10-year Bunds, a reference point for the wider euro zone market, were last yielding 2.737%, down around 1 bp on the day and just above this week's 2-1/2-month low of 2.725%.

On the data front, there is a preliminary read of business activity for the euro zone, which is expected to show a modest recovery, as well as individual surveys for Germany and France.

In the U.S., investors will get a first read of fourth-quarter gross domestic product, which is forecast to have expanded by 3%, and of the Federal Reserve's preferred measure of inflation, the core personal consumption expenditures price index.

Commerzbank strategists said they believed Bunds could come under some pressure, taking ‌their cue from a touch of weakness in the U.S. Treasury market, after ⁠minutes from the Fed's last meeting showed policymakers were divided over the ​outlook for monetary policy, given the persistence of inflation.

"Everything considered, we suggest selling Bunds into strength this morning," Christoph Rieger, who is chief rates strategist at Commerzbank, said.

Elsewhere in the euro zone market, Italian 10-year yields were down 1 bp on the ​day at 3.351%, ‌having fallen 2.4 bps this week to their lowest in four months, while French 10-year ⁠debt yields were also down nearly 1 ​bp at 3.31%, down 3.5 bps this week.

(Reporting by Amanda Cooper. Editing by Mark Potter)