* Euro up 0.7 pct on Europe-IMF safety net offer for Greece
* European shares slip; peripheral economies still a worry
* Benchmark euro zone government bond prices fall
* U.S. 10-year yield up 17 bps in week; auctions weigh
By Emelia Sithole-Matarise
LONDON, March 26 (Reuters) - The euro rallied off a 10-month
low against the dollar on Friday and core euro zone government
bond prices slipped after the region's leaders and the IMF
agreed a joint financial safety net for debt-laden Greece.
But the plan did not alleviate longer-term worries about
Greece and other fiscally vulnerable economies in Europe such as
Portugal and Spain, limiting market moves. []
The deal offers Athens loans and cash but only as a last
resort and can only be disbursed with unanimous euro zone
approval.
The euro rose 0.7 percent to $1.3774 <EUR=> by 0849 GMT as
the Greece deal eased pressure off the single currency.
"It's a positive that there are now more details on how the
financing for Greece will be achieved," said Johan Javeus,
currency strategist at SEB in Stockholm.
"The fact that there will be a mechanism in place reduces
the risk of the euro zone breaking up. But going forward the
market will be focusing more on whether Greece will be able to
deliver the austerity measures it has promised."
The euro initially weakened on news of the Greece deal as
investors took the view that IMF involvement suggested the
16-country euro zone was unable to handle its problems by
itself.
But dealers later began to close out some of the bets they
had made against the euro, pushing the currency up against the
dollar. Dollar weakness, in turn, helped lift oil prices toward
$81 and boosted gold.<XAU=>
Under pressure from the Greek debt crisis, the euro has
fallen around 12 percent versus the dollar since early December,
when it was trading above $1.51.
The U.S. dollar index <.DXY>, a gauge of the dollar's
performance against six other major currencies, slipped 0.4
percent.
FILLING THE CRACKS
Asian share markets advanced but European shares fell
<>, led by banks due to the worries about peripheral
economies in Europe.
"I do not think there will be too much enthusiasm for the
agreement with Greece. It is just filling in the cracks rather
than solving the problems," said Justin Urquhart Stewart,
director at Seven Investment Management.
Greek government bonds outperformed euro zone benchmark
Bunds, narrowing the gap between their yields by 12 basis points
on the day to 309 bps. The cost of protecting against a Greek
government debt default also fell.
Waning demand this week at auctions of U.S. Treasuries were
also adding to worries about government bonds.
The benchmark yield on the 10-year U.S. Treasury note
<US10YT=RR> hit a nine-month high on Thursday and it has gained
17 basis points on the week after a series of poor debt
auctions.
The yield was down 2.5 basis points from late Thursday in
New York, at 3.86 percent by 0910 GMT.
Meanwhile, U.S. crude for May delivery <CLc1> rose for the
first time in three days, gaining 55 cents to $81.08 a barrel,
while ICE Brent <LCOc1> climbed 52 cents to $80.13 in London.
