UPDATE 1-Bruised euro zone bond markets brace for US jobs data

Bond markets in the euro area were headed for their worst week in months on Friday, with fears about tighter central bank monetary policy and another dose of strong U.S. economic data pushing borrowing costs to new highs.

Benchmark 10-year government bond yields in Germany rose to their highest in 4 1/2 months and along with their peers in France and the Netherlands were set for their biggest weekly rise since at least June.

Spanish yields also hit their highest since May, catching up with a sell-off that took off in the United States earlier in the week and rippled across the world.

Solid U.S. economic data and hawkish comments from U.S. Federal Reserve officials sparked the sell-off in U.S. Treasuries - 10-year bond yields are up 15 bps this week and set for the biggest weekly rise in eight months.

U.S. non-farm payrolls data due later on Friday are shaping up as the next test for markets anxious that the Fed could step up the pace of its rate hikes.

Economists polled by Reuters forecast the U.S. economy created 185,000 new jobs in September versus 201,000 in August.

In Europe, an unwinding of European Central Bank stimulus has added to the selling pressure -- October brings a halving of monthly bond purchases to 15 billion euros ($17.26 billion).

In Germany, data on Friday showed industrial orders rebounded in August, rising more than expected.

"It's all related to central banks, (Fed chief Jerome)Powell is hawkish, and don't forget this is the first week of October where ECB purchases have fallen and the Fed's balance sheet reduction has accelerated," said BBVA strategist Jaime Costero Denche.

Most 10-year bond yields in the eurozone were 1 to 2 basis points higher on the day.

Spain's 10-year bond yield rose to its highest since late May at around 1.587 per cent. Portuguese yields briefly touched their highest since mid-June.

In Germany, the bloc's benchmark bond issuer, 10-year yields rose 2 bps to 0.56 percent - a 4 1/2-month high. The yields are up 8 bps this week and on track for their biggest weekly jump since July.

Italian bond yields were 3 to 6 bps higher across the curve, with analysts saying that a note of caution had returned to the bond market over the government's budget plans.

Italian Deputy Prime Minister Luigi Di Maio said on Friday that he would rather defend the Italian people than bow to markets if forced to make a choice.

The Italian government, made up of the anti-establishment 5-Star Movement and the right-wing League, targets a fiscal deficit at 2.4 per cent of GDP next year, three times the target set by the previous government. 

(With inputs from agencies.)