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German GDP likely to contract in 2024, stagnate in 2025 -

DIHK

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U.S. bond yields rise above 4.30% to mid-July highs

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US interest rate options price in Republican sweep

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U.S. job openings report due at 1400 GMT

(Updates prices)

By Medha Singh

Oct 29 (Reuters) - Euro zone government bond yields rose

across the board on Tuesday, taking their cue from U.S.

Treasuries as investors awaited data on domestic inflation and

growth later in the week before U.S. elections on Nov. 5.

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

the euro zone, rose 5 basis points (bps) to 2.34%, not far from

a three-month high of 2.352% touched on Monday.

U.S. yields hit multi-month highs as investors continued to

price in a high probability that Republican former president

Donald Trump will win the race for the White House.

The selloff in bond markets began last week in tandem with

U.S. Treasuries, partly reflecting investors positioning ahead

of the Nov. 5 presidential vote.

Trump's proposed tariff, tax and immigration policies

are seen as inflationary, which would support the dollar and put

bonds under pressure, as well as slowing the pace of Federal

Reserve rate cuts.

"Polls start pricing in a possibility of a Republican

sweep, which several weeks ago seemed highly unlikely. And we

are seeing a Treasury sell-off. That is an acknowledgement of

the fact that budget deficits are expected to become a lot

higher," said Sonal Desai, chief investment officer, fixed

income at Franklin Templeton.

Analysts expect increased volatility heading into the

U.S. elections, with the

options market

bracing for the biggest post-election swings in U.S.

Treasury yields in more than 30 years.

"The increasing probability of a Republican sweep is

also impacting European rates," said Danske Bank chief analyst

Piet Haines Christiansen.

PIVOTAL DATA DUE

As well as the elections taking place in the world's

largest economy, a host of pivotal economic data will be in the

spotlight, starting with U.S. job openings later on Tuesday.

Also on investors' radar this week are a first look at

third-quarter euro zone growth numbers, inflation reports out of

Germany, France and the euro zone, and finally the crucial U.S.

jobs report on Friday.

The German Chamber of Commerce and Industry (DIHK) on

Tuesday forecast that Europe's largest economy would contract by

0.2% this year and would see zero growth next year.

The report adds to a string of data that indicates

deterioration in the euro zone economy. That, coupled with

comments from some European Central Bank policymakers

highlighting concerns about inflation undershooting the central

bank's 2% target, has fuelled bets of steeper rate cuts.

The ECB is widely expected to lower rates by at least 25 bps

at its next policy meeting in December, with traders placing a

34% chance of a larger cut.

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

sensitive to ECB rate expectations, firmed by 4 bps to 2.17%.

Elsewhere, France's 10-year yield rose 7 bps to

3.07%, while Italian yields rose 6 bps to 3.56%.

The gap between Italian and German Bunds -

a gauge of the risk premium investors demand to hold Italian

debt - stood at 122 bps, trading in a tight range over the past

week.