Euro zone bond yields dragged higher by U.S. Treasuries

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr

LONDON, March 30 (Reuters) - Germany’s benchmark 10-year bond yield rose to its highest level in over a week on Tuesday, pushed higher again by rising U.S. Treasury yields on expectations for a swift and strong U.S. economic recovery.

The latest U.S. bond selloff was driven by news on Monday that those aged 30 and older would now be eligible for coronavirus vaccinations and expectations that President Joe Biden’s infrastructure initiative, with a potential $3 trillion price tag, could further lift economic growth and debt issuance.

U.S. 10-year Treasury yields rose to 14-month highs, dragging euro zone bond yields with them.

Euro area yields had fallen in the past week as the European Central Bank stepped up bond purchases and tighter restrictions to contain COVID-19 renewed concern about the euro zone growth outlook.

Ten-year bond yields across the euro area were last up around 3 basis points on the day. Germany’s 10-year Bund yield rose to -0.285%, the highest level in over a week.

“We expect a continuation of the volatile environment in bond markets,” analysts at UniCredit said in a note.

Focus turned to the latest inflation indicators. Spanish EU-harmonised consumer prices rose by 1.2% year-on-year in March, flash data showed on Tuesday, versus a 0.9% price increase expected by a Reuters poll and a 0.1% decrease in February.

German states also started releasing March inflation numbers before a nationwide release later in the day. Inflation in the German state of Baden-Wuerttemberg, for instance, rose 1.9% from a year earlier, versus a 1.4% rise in February.

Euro zone inflation expectations have been rising, pushed higher in part by bets on stronger global growth.

“Today’s macro focus should be on the first inflation indications for March, which could put the recent break-even dynamics to the test,” said Christoph Rieger, head of rates and credit research at Commerzbank,

“In particular, intermediate break-evens have increased of late, to the highest level since 2018, in turn taking real yields to record lows,” he said, referring to inflation-adjusted yields. (Reporting by Dhara Ranasinghe, editing by Larry King)