April 15 (Reuters) - Euro zone government bond yields

rose on Monday after plunging on Friday, as the latest

developments eased fears of an immediate escalation in the

Middle East conflict.

Iran ended its retaliatory attack with no significant damage

to Israel, and Washington said it did all it could to avoid open

warfare erupting between the two countries.

Borrowing costs in the euro area extended their rise

somewhat after stronger than expected U.S. retail sales data

suggested consumers are weathering high interest rates, reducing

the need for rate cuts.

The 10-year government bond yield, the euro

zone's benchmark, was up 6 basis points (bps) at 2.42%, after

dropping 11.8 bps on Friday in its biggest daily fall since Oct.

9, the Monday after Palestinian Islamist group Hamas attacked

Israel. Bond prices move inversely with yields.

"The week is starting on a fraught note, with unease still

clouding sentiment. Investors are on alert for retaliatory

action following Iran's attack on Israel," said Susannah

Streeter, head of money and markets at Hargreaves Lansdown.

The U.S. benchmark 10-year yield reached 4.626%,

its highest since November, up 11 bps.

Analysts said if Bund yields saw upward pressure from

developments in U.S. Treasuries, financial conditions could be

overly tight in the euro zone, and the European Central Bank

would have to respond with easier monetary conditions.

The gap between the 10-year U.S. Treasury and German rates

hit a fresh 4-1/2 year high as yields rose more in

the U.S. than in the euro area, with markets expecting the

Federal Reserve to be more hawkish than the ECB.

It was at 217.53 after reaching 219.95 early in the session,

its highest level since mid-December 2019.

While Fed officials reiterated there was no urgency to cut

rates and supported expectations for two Fed moves this year,

ECB rate-setters argued the ECB could ease its monetary policy

even if the Fed does not.

Lithuanian ECB policymaker Gediminas Simkus said there was a

greater than 50% probability of more than three rate cuts in

2024. Francois Villeroy de Galhau said the ECB was confident of

winning the inflation fight, while ECB chief economist Philip

Lane said inflation was heading to 2% after a bumpy road.

Money markets are pricing in 83 bps of ECB rate cuts

in 2024 from 87 bps late on Friday.

Derivatives on U.S. rates price in 40 bps of rate cuts in

2024, discounting a 60% chance of a second rate cut

this year from around 50% last week after U.S. inflation data.

Italy's 10-year yield, the benchmark for the

euro area's periphery, rose 5 bps at 3.79%.