Euro zone yields rise on strong U.S. jobs data, set for fourth weekly rise

Euro zone bond yields rose ​after U.S. jobs data came in much stronger ​than expected on Friday, keeping borrowing ‌costs on ​track for their fourth straight weekly increase as rising energy prices and resilient growth put pressure on central banks to raise interest rates.

Germany's 10-year ‌bond yield, the benchmark for the euro zone, reversed an earlier fall and was last flat for the day at 3.349%. Data on Friday indicated the U.S. economy had added 162,000 jobs last month, smashing economists' predictions of a ‌56,000 increase. July's figure was revised up to growth of 21,000 jobs.

U.S. data tends to affect ‌global markets owing to the size and importance of the economy and the influence of the U.S. Federal Reserve. U.S. Treasury yields jumped after the data , although the spillover into European markets was relatively muted. Germany's 2-year bond yield, which is sensitive to European ⁠Central Bank ​rate expectations, also reversed ⁠an earlier fall to rise 1 bp to 2.961%.

Investors also watched natural gas and oil prices, which were headed for a weekly ⁠gain, as renewed U.S.-Iran hostilities heightened Middle East supply risks. Bond yields around the world hit multi-year highs earlier this week ​as a rise in energy prices caused traders to raise their rate hike bets, amid concerns ⁠about high government debt loads.

Yields fell back on Thursday as energy prices cooled. Traders were last pricing in 48 bps of further ⁠ECB ​monetary tightening this year, down from above 50 bps on Wednesday but up from 44 bps a week ago.

Economists think the ECB will likely raise interest rates on September 10 for the second and final ⁠time in what would be its shortest hiking campaign in 15 years, according to a Reuters poll. Analysts said ⁠markets are becoming more ⁠sensitive to European gas than to crude alone as the euro zone has been shifting away from Russian and Middle Eastern supply and favoured Norwegian and U.S. alternatives. ‌They also ‌flagged lower-than-average gas storage levels.

(reporting by Stefano Rebaudo and Harry ​Robertson; editing by Alexandra Hudson)