By Dhara Ranasinghe

LONDON, May 9 (Reuters) - Greek government bond prices rose on Monday, outpacing their euro zone peers, after lawmakers in Athens passed a package of unpopular pension and tax reforms that could encourage the country's creditors to unlock bailout cash.

The approval came hours before euro zone finance ministers were due to discuss Greece's progress on reforms and whether it had met the terms of a multi-billion euro bailout.

A positive sign-off on the reform review will unlock more than 5 billion euros ($5.7 billion) to ease Greece's squeezed finances and meet debt repayments maturing in June and July. Greece also hopes that the signoff will launch discussions on debt relief.

Yields on Greek government bonds fell while those on other euro zone bonds rose 1-5 basis points in the face of firmer equity markets and a rally in oil prices.

Two-year Greek government bond yields fell 9 basis points to 10.13 percent, while 10-year bond yields were down 3 bps at 8.6 percent.

"The vote in parliament is constructive and positive for the Eurogroup talks and that should help the decision to give Greece additional support," said Patrick Jacq, European rate strategist at BNP Paribas.

"Although the Greek bond market is illiquid, the fact that yields are lower is a good sign," he added.

Portuguese 10-year yields meanwhile touched their highest level in more than two months at 3.38 percent.

German Bund yields, which on Friday posted their biggest weekly falls since January, rose 1 bps to 0.16 percent.

European stock markets opened higher while oil prices jumped more than 1 percent on outages sparked by a huge wildfire in Canada and data showing German industry orders rose a bigger-than-expected 1.9 percent in March.

A rise in U.S. Treasury yields also weighed on European bond markets. Treasury yields rose after Friday's closely-watched U.S. jobs report showed signs of wage growth, an early sign that inflation may finally be strengthening, and a top Federal Reserve official said raising U.S. interest rates twice this year was still a possibility.

"While the headline number on the non-farm payrolls report was weak, the details showed some signs of strength and that is something the market is looking at right now," said Rene Arecht, derivatives market analyst at DZ Bank.

($1 = 0.8783 euros) (Reporting by Dhara Ranasinghe)