* German Bund yields set for first weekly rise in month
* French, Dutch yields poised for biggest jump in two months
* U.S. jobs data, inflation concerns pushing yields up
By Dhara Ranasinghe
LONDON, Jan 6 Euro zone government bond yields
were set to end the first trading week of the year with their
biggest weekly rise in at least a month, pushed up by inflation
worries and strong U.S. jobs data.
U.S. employment increased less than expected in December but
a rebound in wages pointed to sustained labour market momentum
that sets up the economy for stronger growth and further
interest rate increases from the Federal Reserve this year.
"Despite the miss in the headline-grabbing non-farm payroll
number, the overall jobs report can be considered a strong one
with the all-important average earnings jumping from a negative
reading last month of -0.1 percent to 0.4 percent this month,"
said GKFX analyst James Hughes.
As U.S. yields rose after the data, bond yields across the
euro zone also moved higher, thrusting Portugal's 10-year bond
yield to an 11-month high of 4.10 percent.
The start of 2017 has been dominated by investor worries
that rising inflation could erode the value of bonds, pushing
yields - which move in the opposite direction to prices -
The trigger for those concerns has been data suggesting that
price pressures are increasing, a sharp contrast to a year ago
when deflation risks loomed large.
Data on Tuesday showing inflation in Germany, the euro
zone's biggest economy, touched its highest level in more than
three years in December was followed on Wednesday by news that
consumer prices in the bloc rose by 1.1 percent last month,
nearly twice as fast as in November.
In addition, oil prices hit an 18-month high on Tuesday and
were trading close to those levels on Friday.
"The flash estimates of inflation in December, especially in
Germany, surprised to the upside," said Chris Scicluna, head of
economic research at Daiwa Capital Markets.
"Even though the ECB's policy is pre-determined until the
end of the year, headline inflation will continue to rise, so
the risks to yields are on the upside."
The European Central Bank's asset purchase programme runs
through to the end of 2017.
Germany's 10-year Bund yield, the benchmark in the single
currency bloc, was at 0.30 percent, up 5 basis
points on the day and 9.5 bps higher this week - the first
weekly rise in a month.
Many banks expect Bund yields to end the year around 0.8
French, Irish and Austrian 10-year bond yields
were all set for their biggest
weekly rise in almost two months.
Euro zone bond yields are facing upward pressure from hefty
supply as well, with at least four countries from the bloc
expected to sell debt next week.
(Additional reporting by Abhinav Ramnarayan; editing by Mark