European government bond yields rise after U.S. jobs data

European government bond yields rose after Friday data showed U.S. employers hired more workers than expected in November and raised wages, complicating the Federal Reserve's intention to start slowing the pace of its interest rate hikes this month.

European government bond yields rose after Friday data showed U.S. employers hired more workers than expected in November and raised wages, complicating the Federal Reserve's intention to start slowing the pace of its interest rate hikes this month. Germany's 10-year bund yield, the benchmark for the euro zone, was last at 1.83%, a whisker higher on the day, having earlier traded down as low as 1.76%, its lowest since Sept 19.

Italy's 10-year bond yield rose 3 basis points to 3.74%, having earlier dropped as low as 3.647%, its lowest since late August. The moves followed larger shifts in U.S. yields following the data, which showed U.S. nonfarm payrolls

increased by 263,000 jobs last month , compared to a Reuters estimate of 200,000.

Government bond prices globally have been rallying in recent weeks driven by hopes the U.S. Federal Reserve will move away from its aggressive pace of interest rate hikes, which earlier in the year badly bruised bond prices and sent yields soaring. This rebound had been underscored this week by a dovish speech by Fed chair Jerome Powell on Wednesday - as well as U.S. data on Thursday that raised concerns about slowing economic growth while also indicating a slowdown in inflation.

Though Friday's data undermined this narrative. "Market attention is on acceleration in wage growth - a key concern for the Fed - and wondering whether this is a reality check after the reassurance they derived from Powell's words earlier in the week," said Richard McGuire head of rates strategy at Rabobank.

The benchmark U.S. 10 year yield was last up 5 bps at 3.5719%, having briefly touched as high as 3.638%. The German two-year yield was last at 2.045%, up 1 basis point, compared to 1.958% before the data. The Italian two-year yield rose a similar amount to 2.61%.

The closely watched spread between Italian and German 10-year yields was 190 basis points.