Euro zone bond yields rise as traders digest hot US inflation, await Alaska summit

By Lucy Raitano

LONDON, Aug 15 (Reuters) - Euro zone bond yields rose on Friday as markets continued to digest Thursday's hot U.S. inflation print while awaiting the Alaska summit between U.S. President Donald Trump and Russian President Vladimir Putin.

German 10-year yields DE10YT=RR were up 6.5 basis points at 2.77%, while rate-sensitive German 2-year yields DE2YT=RR were up 2 bp at 1.96%.

Germany's 10-year yield rose 7 bps on Thursday after U.S. producer prices (PPI) figures came in above expectations.

"That could really be the reason that this trend is continuing from yesterday ... the dynamic was driven by the PPI in the U.S.," said Christian Reicherter, an analyst at DZ Bank.

The stronger-than-expected producer price data renewed inflation concerns and prompting traders to scale back Federal Reserve rate cut bets.

The key inflation tracker increased by the most in three years in July amid a surge in the cost of goods and services, suggesting a broad pickup in inflation was imminent.

U.S. Treasury yields rose, a move that transferred across to euro zone markets.

While the dynamic continued into Friday, markets are generally quiet amid thin summer trading.

Italy's 10-year bond yield IT10YT=RR rose 8.3 bps to 3.59%, pushing the spread between Italian and German 10-year yields DE10IT10=RR to 82 bps, the tightest since at least 2011, according to LSEG data.

Elsewhere, traders are assessing Friday's summit in Alaska.

Trump and Putin will hold talks focused on the U.S. president's push to seal a ceasefire deal in Ukraine, but with a last-gasp offer from Putin of a possible face-saving nuclear accord on the table too.

"I don't expect any real outcome there that could have a huge impact on the markets" said Reicherter.

The White House said the summit would take place at 11 a.m. Alaska time (1900 GMT).