* Bunds in corrective mood, focus on support at 130.24
* Supply to remain key driver through 2011
(Updates to midsession)
By Kirsten Donovan
LONDON, Sept 10 (Reuters) - German government bonds fell on Friday, still in a corrective mood, as equities pared early losses and with more upbeat data from the United States easing fears of a double-dip recession.
Jobs and trade data on Thursday helped calm fears of a sharp slowdown in U.S. growth, and traders said news that state-owned conglomerate Dubai World has agreed with more than 99 percent of its creditors to restructure its debt was moderately supportive.
"Yesterday (peripheral) spreads were tamer and a bit of risk was bought into," said ING rate strategist Padhraic Garvey.
"Today it's a bit of a neutral end to the week. We'll probably drift over the course of the day and take it up again on Monday."
At 1010 GMT, December Bund futures were 8 ticks lower at 130.70, having fallen as low as 130.49, attempting to test Thursday's low of 130.46.
Two-year bond yields were little changed at 0.707 percent, with 10-year yields up 1.4 bps at 2.341 percent. Thirty-year bonds underperformed, with yields up 2.8 bps at 2.94 percent.
That steepened the 10/30 year yield curve to around 58 bps. It moved as low as 50 bps in late August.
"Corrective is the word. Bunds ran up quite hard and since then it's been choppy, but the general direction is towards higher yields," said RBS rate strategist Harvinder Sian.
"The corrective activity is probably not over yet but we're getting close to buying levels."
Nomura rate strategist Walter Burke said the next pivotal support level for Bund futures comes at last Friday's low of 130.24.
"If this support holds, it could bode well for a sideways consolidation to form mostly between 130.24 and near, or in front of, the Aug 25/31 highs at 133.29," he said.
However, a break of the support could see the market making a deeper correction towards the 50 percent retracement of July and August's rally at 129.65, he added.
But traders said the market lacked clear conviction when it came to direction.
"The market continues to be driven by speculation on the strength of the economic recovery and sentiment is shifting day-to-day on that," one said.
"It's been pretty volatile with big moves which would seem to indicate that there is no real consensus view out there at the moment. A risk-on day can become a risk-off day very quickly."
European shares recovered from an early slip, with the FTSEurofirst 300 index of top European shares down 0.2 percent at 1,079.80 points after earlier falling to 1,077.31, with bank shares hurt by reports Deutsche Bank planned to raise capital.
Peripheral yield spreads were broadly steady and analysts said the prospect of above-average 27 billion euros of issuance next week prevented further narrowing.
Indeed, supply is likely to remain one of the key spread drivers through 2011, with 1,250 billion euros of debt to be rolled over - including bills and non-euro denominated debt, said Commerzbank strategist David Schnautz.
"Euro zone government bond spread levels are far off any steady levels but subject to flows including supply," he said.
Spain and Portugal have around 25 percent of their outstanding debt maturing through 2011, the bank calculates, while France has nearly 30 percent and the largest amount in absolute terms at around 350 billion euros.