LONDON, June 27 (Reuters) - Euro zone government bond yields rose to their highest levels in two weeks on Thursday as investors looked ahead to inflation data due from the United States and Europe.
The risk premium investors demand to hold French debt widened to within striking distance of a seven-year high hit almost two weeks ago, as markets looked towards the first round of parliamentary elections at the weekend.
Germany's 10-year bond yield, the benchmark for the euro zone, rose to 2.471% in early trading, the highest since June 14. It last stood 1 basis point (bp) higher at 2.463%. Yields move inversely to prices.
Stronger-than-expected inflation prints from Australia and Canada this week have reminded markets that the battle against price rises is ongoing.
U.S. personal consumption expenditure (PCE) inflation data for May is due on Friday, and is likely to guide Federal Reserve policy and have knock-on effects for other central banks.
Piet Haines Christiansen, chief strategist for fixed income research at Danske Bank, said bond markets were giving back some of their gains clocked after French President Emmanuel Macron called snap elections on June 9, which caused investors to flock to the safety of bonds, German debt in particular.
"Now we're seeing that basically, no news leads to higher rates," he said. "While we're waiting for something, we need to reprice somewhat back to where we were pre 9 June."
France's 10-year bond yield rose to 3.264% in early trading, the highest since June 11, and was last up 3 bps. Italy's 10-year yield climbed to 4.041%, the highest since June 12.
The risk premium investors demand to hold French debt crept higher, with the so-called spread between French and German 10-year yields rising to 79 bps, near the more than 80 bp level hit on June 14.
Italian bonds' spread over their German peers also rose, up to 157 bps. The spread hit its widest since mid-February on June 14 at 159 bps as investors bought German bonds.
Haines Christiansen said investors were also looking towards next week, when euro zone inflation figures for May will be released and the European Central Bank's annual Forum on Central Banking will take place in Portugal.
France and Spain are among the countries to release inflation data tomorrow, ahead of the euro zone-wide number. (Reporting by Harry Robertson; Editing by Mark Potter and Alexander Smith)
