LONDON, March 15 (Reuters) - Germany's 10-year bond

yield, the benchmark for the euro zone, rose for a fifth day

straight on Friday and was on track for its biggest weekly rise

since July 2023 as economic data cast doubt on investors' hopes

that interest rates will soon be falling.

The German 10-year yield was up by 1 basis point

(bp) at 2.432%, heading for a 17 bps rise for the week. Yields

rise when prices fall and vice versa.

The sell-off this week was triggered by two

stronger-than-expected U.S. inflation readings that suggested

the Federal Reserve might not be able to cut interest rates in

June as investors had been expecting.

Given that investors broadly expect the European Central

Bank and the Fed to cut rates at around the same time, and the

size and importance of the U.S. bond market and economy,

expectations about American borrowing costs cause yields

elsewhere to swing.

German 2-year bond yields, which are more

sensitive to interest rate expectations, rose 2 bps to 2.898%

and were on track to rise 16 bps this week, which would be their

biggest weekly increase since early February.

Data on Tuesday showed U.S. consumer prices increased more

than expected in February. That was followed up by a report on

Thursday that showed producer prices also climbed more steeply

than economists had anticipated, while weekly jobless claims

remained subdued.

"The driver this week has been the very strong numbers in

the U.S.," said Emmanouil Karimalis, macro rates strategist at

UBS, adding people had started to worry about the persistence of

inflation again.

"The underlying driver of rates and sentiment right now is

how strong the data is in the U.S. and there's a spillover

effect to Europe," Karimalis said.

Italy's 10-year yield was 2 bps higher at

3.694%. At 11 bps, it has risen less than Germany's 10-year

yield this week, which on Thursday helped push the closely

watched "spread" between the two borrowing costs to a 26-month

low of 115 bps. It rose to 124 bps on Friday.

Next week will be another busy one for investors, when the

Bank of Japan, Federal Reserve and Bank of England all set

interest rates.

Market pricing on Friday showed investors see a roughly 80%

chance the ECB will cut rates by June, down from 90% at the

start of the week. For the Fed, a June cut was priced at 65%,

down from 85% on Monday.