(Updates at 0730 GMT re-tops with spread milestone, adds

analyst quote)

By Alun John

LONDON, June 28 (Reuters) - The risk premium on French

government bonds rose to its widest since the 2012 euro zone

crisis on Friday ahead of the first round of voting this weekend

in the country's parliamentary election, as traders also kept a

wary eye on U.S. inflation.

The spread between German and French 10-year yields reached

84 basis points, its widest since September 2012.

The German 10-year bond yield, the benchmark for

the euro zone, was down a fraction at 2.45%, while France's

10-year yield was up a touch at 3.28%

The spread widened significantly earlier this month after

President Emmanuel Macron called the snap parliamentary

election. Opinion polls point to the far-right winning the most

seats, but falling short of an overall majority, while a far

left-bloc in predicted to come in second.

The first round of voting is on Sunday, but the final

outcome will not be known until after a second round on July 7.

It is hard to predict the outcome as it will largely depend on

to what extent rivals of the far-right Rassemblement National

party will team up and withdraw their own run-off candidates to

block the far-right.

Some strategists, though, believe markets are getting ahead

of themselves.

"These French election jitters, quite frankly it's

overdone," said Piet Haines Christiansen, chief strategist for

fixzed income research at Dankse Bank.

"France has had its structural problems... overall, I don't

think that these election jitters (in bond markets) will change

anything on that.

"I think it's too wide for the summer months and we should

expect some more (French) OAT versus (German) Bund tightening."

France is not the only thing on markets' agenda for Friday.

"The French election is likely to be the main focus by

Monday, but before we get to that, today will bring several

important inflation numbers," said Jim Reid, global head of

macro research at Deutsche Bank, in a morning note.

"In particular, we've got the US PCE inflation report for

May, which is the measure that the Fed officially target, and

hence is closely followed in markets."

That data is due at 1230 GMT, and analysts polled by Reuters

are expecting a 2.6% year-on-year gain for both headline and

core PCE.

French preliminary inflation for June was released earlier

on Friday. The EU-harmonised measure came in at 2.5% in line

with expectations. It did little to move bond markets.

Italy's 10-year yield was lower by 2.2 basis

points​ at 4.01%.