By Dhara Ranasinghe
LONDON, Aug 8 (Reuters) - Euro zone bond yields rose on Monday after a sell-off in fixed income markets gathered pace following strong U.S. jobs data, with southern European bonds facing additional pressure as DBRS put Italy under a ratings review.
U.S. Treasury yields posted their biggest one-day rise since mid-May on Friday after July's 255,000 rise in U.S. nonfarm payrolls boosted expectations for a Federal Reserve rate rise this year. Japanese 30-year bond yields rose to a four-month high on Monday.
A decision by ratings agency DBRS late on Friday to put Italy under review, casting doubt on the country's last "A" rating from a major agency, also took markets by surprise.
"The 10 basis point sell-off in Treasuries on Friday means euro zone bond markets are on the back foot today," said Commerzbank interest rate strategist David Schnautz.
"The weakness in peripheral bond markets probably reflects the news that DBRS will put Italy's ratings under review and we could see some pressure on bond spreads in the days ahead."
DBRS said it decided to review the ratings outside its usual calendar because of political uncertainty linked to a forthcoming referendum, pressure on banks, a fragile economic recovery and a less stable external environment.
DBRS rates Italy "A", making it the only one of the four major agencies whose rating the European Central Bank can use to keep Italy in the top band for collateral requirements for its lending to banks.
That means a downgrade would raise the cost for Italian banks of using government bonds as collateral for taking loans from the ECB.
Italy's 10-year bond yield rose 1.5 basis points to 1.16 percent, up from a 17-month low hit last week at around 1.13 percent.
That dragged Spanish and Portuguese bond yields a touch higher against a backdrop of rallying European equity markets, which often lifts demand for riskier peripheral bonds as well.
Other euro zone bond yields were 1-2 basis points higher.
For Reuters new Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Reporting by Dhara Ranasinghe; editing by John Stonestreet)