Jan 15 (Reuters) - Euro area benchmark Bund yields edged

lower on Wednesday, breaking a 10-day rising streak, as

investors awaited U.S. consumer price inflation figures later in

the session.

Strong economic data and fears that U.S. President-elect

Donald Trump's policies could boost inflation have driven yields

up on both sides of the Atlantic since early December.

Germany's 10-year yield dropped 2 basis points

(bps) to 2.60% after hitting a fresh seven-month high at 2.63%.

"The recent move higher in euro rates mainly reflects an

increase in the beta to U.S. rates over the past month," JP

Morgan strategist Francis Diamond said in a research note.

"We find the recent term premium repricing in German yields

quite excessive and expect the cheapness to fully correct going

forward and stay long 10-year Bund," he added.

Euro zone industrial production rose as expected in November

but new data was unlikely to signal any major turnaround for a

sector in its second year of recession.

U.S. 10-year Treasury yields were down 1.5 bps

to 4.77% after hitting 4.8090% on Tuesday, its highest level

since Nov. 1, 2023.

"The front-end (of U.S. yields) is already fully discounting

only one more Federal Reserve cut for this year, but it is

especially the back-end (longer-term) of the yield where we see

more upside on the back of supply and inflation pressures," said

Padhraic Garvey, regional head of research Americas at ING.

"To reverse this trend we'd need to see Wednesday's CPI

report surprise to the downside," he added, before flagging the

core monthly inflation rate is expected at 0.3%, which

"annualises to over 4% inflation."

Germany's 2-year bond yield, more sensitive to

European Central Bank rate expectations, fell 2 bps to 2.3%

after hitting a fresh 2-1/2-month high at 2.323%.

Money markets priced in a European Central Bank deposit

facility rate at over 2.1% at the end of 2025, from 1.8% in

early December.

The yield spread between French and German yields

, a gauge of the risk premium investors demand to

hold french debt, stood at 83 bps.

French Prime Minister Francois Bayrou on Tuesday opened the

door to renegotiating a disputed pension reform in a bid to win

over left-wing lawmakers whose support he needs to pass the 2025

budget. Such a move which could increase market concerns about

the government's ability to curb the burgeoning public deficit.

Italy's 10-year government bond yield was down 4

bps at 3.79%, while the gap between Italian and German yields

stood at 118 bps.