LONDON, Sept 13 (Reuters) - Euro zone bond yields rose on Wednesday, with Italy's 10-year yield hitting a six-month high, as a Reuters report that the European Central Bank expects inflation to remain above 3% next year boosted market bets of an ECB rate hike this week.
The day's main macro economic event for global markets is U.S. inflation data released at 1230 GMT which will help shape the Federal Reserve's rate decision later this month.
In Europe, traders are also bracing for the ECB's meeting on Thursday - current market pricing reflects nearly a 75% chance the central bank will raise rates by 25 basis points, up from around a 40% chance on Monday and just 25% a week ago.
Markets are taking the chance of a 25 basis point rate increase "increasingly seriously" said Deutsche Bank strategist Jim Reid in an early Wednesday note, mentioning "fresh signs of inflationary pressures" such as higher oil prices.
He also pointed to a Reuters report late on Tuesday, which said, citing a source with direct knowledge of the matter, the ECB's quarterly projections will put inflation north of 3% in 2024.
That would support the case for a further rate increase, though the source said the rate decision was still a close call.
The yield on Italy's 10 year bond hit 4.452% in early trading, its highest since mid March, and was last at 4.44%, up 3 basis points (bps) on the day.
Germany's 10 year yield rose less, last up 1.6 bps at 2.66%, meaning that the spread between the German and Italian 10 year yields touched 176.9 bps, its widest since July 12.
Bond yields move inversely to prices and higher rates from the ECB would typically weigh more heavily on the more-indebted European periphery.
Some market participants expect an acceleration of the ECB's quantitative tightening measures – in which the central bank reduces its bond portfolio – to hurt peripheral bond prices.
Shorter dated yields, more sensitive to interest rate expectations, also rose. Germany's two-year yield was up 3 bps at 3.18%, having briefly touched a one-month high, and Italy's two-year yield touched a two-month high and was last 5 bps higher at 3.88%. (Reporting by Alun John; Editing by Christina Fincher)