(Updates with afternoon European trading)

By Harry Robertson

LONDON, Jan 3 (Reuters) - Euro zone bond yields rose to

their highest in six weeks on Friday, after data showed German

unemployment rose less than expected in December, a modicum of

support for its struggling economy, Europe's largest.

Data on Friday showed the number of unemployed people in

Germany increased by 10,000 in seasonally adjusted terms to 2.87

million. Analysts polled by Reuters had expected that figure to

rise by 15,000.

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

the euro zone, rose 4 basis points (bps) to 2.40%, its highest

since mid November. Yields move inversely to prices.

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

to expectations for European Central Bank rates, rose 6 bps to

2.145%, its highest since Nov. 20.

A stronger euro zone economy could lead the European

Central Bank to be more cautious when it comes to interest rate

cuts.

But analysts have cautioned that trading is still thin after

the holidays, meaning prices are more volatile than usual.

"There is clearly a decent chunk of the market that is still

out of the office and this means that we are loathe to read too

much into market moves," Rabobank analysts said in a research

note, referencing Thursday's fall in bond yields.

Italy's 10-year yield rose 5 bps to 3.59% and

the gap between Italian and German yields stood at

117 bps.

The closely watched gap between French and German bond

yields rose to 87 bps on Friday, its highest since Dec. 3.

The spread - a gauge of the premium investors demand to hold

French debt - shot up in the summer as elections plunged the

country into political turmoil.

It has remained elevated, at around its highest levels since

the euro zone crisis of 2012, while new Prime Minister Francois

Bayrou attempts to build consensus to pass a budget, something

his predecessor Michel Barnier failed to accomplish.

"Investors ... appear to remain unconvinced whether the new

French Finance Minister will be able to pass a budget with a

deficit of 'slightly above 5%', which is envisioned to be passed

by mid-February," said Hauke Siemssen, rates strategist at

Commerzbank.