* German inflation stronger than expected
* Euro zone economic sentiment highest in over 17 yrs
* U.S. Q3 GDP revised higher
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Updates throughout)
By Dhara Ranasinghe and Abhinav Ramnarayan
LONDON, Nov 29 (Reuters) - German bond yields were set for their biggest one-day jump in almost three weeks on Wednesday as firm inflation data from Germany combined with strong U.S. and euro zone economic numbers to spark heavy selling across fixed income markets.
Euro zone bond yields were up 2-5 basis points and U.S. 10-year Treasury yields hit at two-week high at around 2.40 percent after data showed the U.S. economy notched up its quickest pace in three years in the third quarter.
German inflation accelerated ahead of expectations in November, with consumer prices rising 1.8 percent year-on-year, compared with the 1.7 percent forecast by analysts polled by Reuters.
A market gauge of long-term inflation expectations rose to its highest in just over eight months at 1.7030 percent , suggesting investors may start to question how long the European Central Bank will maintain an ultra-loose monetary policy stance.
The ECB in late October extended its 2.4 trillion euro bond-buying scheme until at least September 2018, as it attempts to push inflation in the bloc up to its key target of just below 2 percent.
Germany’s benchmark 10-year bond yields rose 5 basis points to almost 0.40 percent, its highest level in almost two weeks. It was set for its biggest one-day rise since Nov. 9.
Euro zone consumer price data is due out on Thursday. Spanish data released on Wednesday showed consumer prices rising 1.7 percent year-on-year in November, below a Reuters poll of 1.9 and unchanged from October.
Separately, European Commission data showed expectations of higher prices among manufacturers and consumers, while economic sentiment rose in November to its highest level in more than 17 years.
“There’s more than enough to justify the move higher in bond yields today,” said Chris Scicluna, head of economic research at Daiwa Capital Markets.
“There is a data and a policy element to the selloff,” he said, referring to efforts in Washington to advance a U.S. tax bill which was contributing to the defensive mood in bond markets.
In what may be one of her last public appearances before leaving the Fed chair early next year, Janet Yellen said on Wednesday a strengthening U.S. economy will warrant continued interest rate increases.
Elsewhere, British two-year government bond yields touched their highest level since June 2016’s Brexit vote after media reports that Britain was close to a deal with the European Union on how much it needs to pay to leave the bloc.
The sell-off in gilts, which put 10-year gilt yields on track for their biggest one-day rise since June, added to the weaker tone in European bond markets.
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Reporting by Dhara Ranasinghe and Abhinav Ramnaryan; Editing by Alison Williams