(Refiles to change day in paragraph 6 to Friday from Thursday)
* Sell-off begins after BoE “arch-dove” turns into hawk
* German 10-year yields hit one-month high after Gilt spike
* Economists expect ECB to announce tapering in October
* U.S. rate hike bets increase on strong domestic consumer prices
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By Abhinav Ramnarayan
LONDON, Sept 15 (Reuters) - The euro zone government bond sell-off resumed on Friday after some hawkish rhetoric from a Bank of England policymaker bolstered expectations that central banks across the developed world are in tightening mode.
Earlier, a missile test from North Korea on Thursday night made many retreat to safe-haven assets such as German government bonds.
But comments from British rate-setter Gertjan Vlieghe — who has previously been strongly in favour of keeping borrowing costs at their record low — that the BoE might need to raise interest rates in the coming months pushed yields higher again .
“Such comments show that even an arch-dove such as Vlieghe has fallen in line with the view that policy will have to be tightened in the coming months,” said Rabobank strategist Richard McGuire.
“And this follows the hawkish signals from the BoE on Thursday, so it’s not surprising that yields were pushed higher.”
British 10-year Gilts rose as much as 10 basis points to 1.33 percent on Friday. Euro zone bond yields also moved higher as a result; bonds in the world’s major economies often move in sympathy with one another as investors switch between them.
Germany’s 10-year government bond yield, the benchmark for the euro zone, hit a one-month high of 0.44 percent, up 2 bps on the day and up 4 bps from the session’s lows.
Other euro zone bond yields were 1 to 2 basis points higher on the day.
Euro zone government bond yields have been rising all week on expectations the European Central Bank will announce a start to tapering of its asset purchases when it meets next month.
A Reuters poll of economists showed they expect the central bank to announce in October that it will extend its asset purchases by six months but cut how much it buys each month to 40 billion euros from January.
Expectations around U.S. Federal Reserve action has also ramped up after Thursday’s stronger-than-forecast increase in consumer prices in the world’s largest economy.
“The market will be watching the Fed next week very closely, first because of balance sheet reduction and as well because the market is now pricing a higher probability of a rate hike in December,” said DZ Bank strategist Rene Albrecht.
A spate of supply had also helped push yields higher: Ireland, Italy, Austria, Germany and the Netherlands have between them sold over 20 billion euros of bonds over the past week.
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 Abhinav Ramnarayan; Editing by Larry King