LONDON, Nov 13 (Reuters) - Euro zone bond yields ticked higher on Monday, echoing a move in U.S. Treasuries and giving up small declines from early trading, as traders braced for several key pieces of data this week, most significantly U.S. inflation figures.
Italian bonds performed a fraction better than peers after Fitch affirmed Italy's rating late on Friday.
The other ratings news from Friday - Moody's lowering its outlook on the U.S. credit rating to "negative" from "stable" - contributed to a move higher in U.S. yields, as U.S. investors digested the news and ahead of Tuesday's inflation data.
The ripples of that turn higher at the start of U.S. trading were felt in Europe, and Germany's 10-year yield was at 2.73%, up two basis points, reversing a small one-basis-point (bp) move lower earlier in the day, though nearer the bottom than the top of its recent range.
"We're stuck in between what happened last week and what lies ahead this week, and Bund yields are consolidating at the low end of the range following the retracement in oil prices," said Kenneth Broux, head of corporate research, FX and rates at Societe Generale.
"We're hoping for friendlier inflation news in the U.S. and UK this week, but there is still uncertainty over the return to target. Lagarde repeated that last week and Michigan long-term inflation expectations are also drifting up," he said, referring to European Central Bank President Christine Lagarde.
Central banks' relentless interest rate hikes last year and in the first half of this year to curtail sticky inflation weighed heavily on government bonds, sending European 10-year yields to their highest level in over a decade in October.
U.S. inflation data is due on Tuesday, and Britain's on Wednesday.
The University of Michigan's survey of consumer sentiment, released on Friday, showed the outlook for U.S. inflation in the year ahead rose in November for a second consecutive month to a seven-month high of 4.4%, while over a five-year horizon, consumers expect inflation to average 3.2%, up from 3.0% in October and the highest since March 2011.
Lagarde said on Friday that euro zone inflation could tick up in the coming months, though holding rates at their current level at least for several quarters could still get price growth back to 2%.
ECB Vice President Luis de Guindos said in a speech on Monday that he expects a temporary rebound in inflation in the coming months but that the general disinflationary process would continue over the medium term.
Italy's 10-year bond yield was last flat on the day at 4.57% , also giving back an earlier decline. Its slight outperformance versus German Bunds meant that the closely watched gap between German and Italian 10-year yields reached as narrow as 180 bps..
Fitch ratings on Friday affirmed Italy's rating at BBB and left its outlook as stable, though markets' main focus is on Moody's which, this coming Friday, will conclude its review of Italy's rating. It currently has a negative outlook on Italy with its rating one notch from high-yield territory.
"But all three other main rating agencies have affirmed their rating in recent weeks ... and rate it higher than Moody's so they would really be going out on a limb if they downgraded whatever the fundamental rationale," said Jim Reid Deutsche Bank research strategist in a note to clients.
Moves at the shorter end of yield curves were also limited. Germany's two-year yield rose 3 bps to 3.17% and Italy's was flat at 3.78%. (Reporting by Alun John; Editing by Sharon Singleton, Susan Fenton and Andrew Heavens)
