* Fed Chair says rate rise likely at an upcoming meeting
* U.S. and other benchmark bond yields rise, dollar firms
* French, Irish yields converge for first time since 2007
* Euro zone periphery bond yields tmsnrt.rs/2ii2Bqr
(Recasts and writes through)
By John Geddie and Abhinav Ramnarayan
LONDON, Feb 14 Europe's benchmark German bond
yield climbed to a one-week high on Tuesday after signals the
Federal Reserve was preparing to raise U.S. interest rates.
Although Fed Chair Janet Yellen flagged considerable
uncertainty over economic policy under President Donald Trump,
she said the central bank is likely to need to raise interest
rates at an upcoming meeting.
That pushed up U.S. and other global benchmark bond yields
and strengthened the dollar, as traders started to price in a
slightly higher chance of a move at the Fed's next meeting, on
"The general tone from the statement is pretty upbeat ...
Markets were relatively relaxed about March, and perhaps it may
just edge expectations slightly in that direction," said
Victoria Clarke, an economist at Investec, adding that she
expected the next increase in June.
U.S. job growth surged more than expected in January but
wages barely rose, creating something of a mixed picture for the
Fed as wage growth is one of the main drivers of inflation
U.S. inflation and retail sales data for January are due on
In the euro zone, analysts said disappointing growth data
and an uncertain political outlook should temper any further
rise in bond yields.
Data on Tuesday showed the German economy, the euro zone's
biggest, expanded 0.4 percent in the final quarter of 2016,
slightly below expectations, tamping down inflation expectations
German 10-year yields initially dipped slightly on Tuesday,
but were some 4 basis points higher at a one-week high of 0.38
percent as markets prepared to close.
France - at the centre of Europe's political concerns,
because far-right, eurosceptic Marine Le Pen is in contention
for an upcoming presidential vote - saw its 10-year borrowing
costs converge briefly with lower-rated Ireland for the first
time since 2007.
France's credit ratings of Aa2, AA and AA from Moody's, S&P
Global and Fitch are several notches above Ireland's A3, A+ and
Meanwhile, there appeared to be some comfort for investors
in Italian bonds - where yields have shot to 19-month highs in
recent weeks - after former Italian Prime Minister Matteo Renzi
called for a leadership contest in his ruling Democratic Party
that will probably delay snap elections.
Italy's 10-year yield was up slightly at 2.24
percent on Tuesday but rose less than German equivalents.
"This perpetuates the uncertain outlook for Italian
politics, but the market now feels that elections will happen
later rather than sooner and that's giving some comfort," said
Rabobank strategist Richard McGuire.
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
(Editing by Larry King)