April 1 (Reuters) - German government bond yields rose on Friday, after posting in March their biggest monthly jump in years, on expectations of surging inflation and monetary policy tightening.
Some analysts expect Germany's 10-year yield to stay at around 0.5%, as the downside risks to the economy from the Ukraine conflict will offset the central banks' commitment to tame inflation.
Negotiations aimed at ending the five-week war were set to resume even as Ukraine braced for further attacks from Russian forces in the south and east.
Germany's 10-year government bond yield rose 5 basis points (bps) to 0.6% after falling 11 bps the day before.
It staged, in March, its biggest monthly rise since 2009, up 39 bps.
Italy's 10-year yield was up 6 bps at 2.1%.
Investors will focus on U.S. employment data due later in the day which might affect the Federal Reserve's monetary policy stance.
"Payrolls today will help to frame where the market mindset is," ING analysts said in a note to clients. "Should market rates drift lower after payrolls, it will feel like a local peak has certainly been reached."
"At the same time, the payroll event could be used as an excuse to testing towards higher yields," they added.
ING sees upside potential for (U.S.) market rates as far as the 2.75% area, "particularly as the Federal Reserve has not even started to unwind its balance sheet."
Data on Wednesday and Thursday showed higher-than-expected inflation in euro zone countries.
Numbers on the euro zone harmonised index of consumer prices (HICP) are due on Friday at 0900 GMT.
France's government bond yields have priced in an Emmanuel Macron win at the upcoming presidential election on April 10, as the spread between French and German 10-year yields tightened recently. It was around 43 bps on Friday.
"This creates asymmetric risks ahead amid tightening poll support versus (Marine) Le Pen, with 40% of voters still undecided," Citi analyst said in a note to clients.
"We see the 10-year OAT-Bund widening by 20 bps on the tail risk of a Le Pen win," they added.
Macron is set to win the run-off of the French general election with 54.5% of votes against the far-right leader Le Pen, BVA pollsters said on Friday.
The spread between Italian and German 10-year yields has been at around 150 bps despite monetary tightening expectations and it widened 2 bps to 150.5 bps on Friday.
Some European Central bank officials, including president Christine Lagarde, said the bank is ready to use a wide range of instruments to avoid fragmentation, including the reinvestment of its portfolio. (Reporting by Stefano Rebaudo; editing by Uttaresh.V)
