(Updates headline, news and prices at 1448 GMT)

By Alun John and Joice Alves

LONDON, April 25 (Reuters) - Euro zone bond yields rose

to a fresh five-month high on Thursday after a measure of U.S.

inflation accelerated more than expected in the first quarter,

reinforcing bets that the Federal Reserve would not cut interest

rates before September.

Even as growth was weaker than previously thought, with

U.S. gross domestic product (

GDP

) increasing less that economists expected at a 1.6%

annualized rate last quarter, the personal consumption

expenditures (PCE) price index - excluding food and energy -

increased at a 3.7%, above expectations.

Germany's 10-year bond yield, the benchmark for

the euro zone, rose 5 basis points to 2.63%, briefly touching

its highest level since November.

The U.S. 10-year yield surged to its highest since early

November and was last 6 bps higher at 5.71%.

European and U.S. yields have been gradually trending higher

in April, and for much of this year, as economies appear more

resilient than expected, and inflation, at least in the U.S.,

proves sticky, causing markets to push back expectations of

central bank rate cuts.

On Tuesday, a flash reading of the Purchasing Managers'

Index (PMI) showed business activity in the euro zone expanded

at its fastest pace in nearly a year in early April, as optimism

remained strong and companies increased headcount.

The ECB has all but promised a rate cut in June, but its

policymakers are still debating what happens after that.

"In theory the ECB can start their cutting cycle before the

Fed, but do I think they can do multiple cuts before the Fed

starts? No. Sensitivity to the global currency markets will be

problematic," said Nathan Thooft, chief investment officer,

multi-asset solutions, at Manulife.

Thooft expects European government bonds to continue to

trade broadly in line with their U.S. peers and be responsive to

Fed expectations.

Markets currently see the Fed's first rate cut coming in

September, though they have not ruled out July.

SPAIN POLITICS

Investor eyes were also on Spain, after the country's Prime

Minister Pedro Sanchez said on Wednesday he would step back from

public duties "for a few days" to decide whether he wanted to

continue leading the government after a court launched a

business corruption probe into his wife's private dealings.

Spain's 10-year yield was up 5.8 bps on the day at 3.44%,

with moves in line with the German and U.S.-10 year yields.

Also in the mix on Thursday were remarks from European

Central Bank (ECB) board member Isabel Schnabel, who said the

final stage of getting euro zone inflation back to 2% would be

bumpy and an erosion in productivity, along with high services

costs, posed some of the biggest risks.

​Italy's 10-year yield was up 4.7 bps at 4.00%,

having hit its highest since December earlier in the day. The

gap between Italian and German bunds was at 136

bps.

Germany's two-year bond yield, which is more

sensitive to ECB rate expectations, was up 5 bps at 3.01%.