German yields hover near six-week highs as investors brace for ECB
* Euro zone bonds range-bound before ECB
* U.S. data helps German yields hit six-week highs
* Spain, France sell bonds
LONDON, Dec 5 (Reuters) - German yields hovered near six week-highs on Thursday, stabilizing before a rate policy meeting and one day after strong U.S. data triggered a bond sell-off on the view that monetary stimulus could be withdrawn.
Investors are particularly sensitive to data this week as they brace for rate decisions from the European Central Bank and the Bank of England. A key U.S. jobs number on Friday should also be decisive for the Federal Reserve's rates outlook.
While the European Central Bank is expected to keep interest rates unchanged at 0.25 percent, it will also release new economic projections which are likely to point to euro zone inflation remaining below target into 2015.
This would raise the pressure on the bank to take policy action next year, as data continues to paint a patchy picture of the euro zone economy. Analysts expect an inflation forecast of 1.3 or 1.4 percent for 2015.
"Anything higher than that, I think would be badly taken by the short-end. Anything lower than that would keep the door truly open for another easing going forward," Nick Stamenkovic, bond strategist, at RIA Capital Markets said.
"The majority of investors are anticipating no move by the ECB particularly after last month's easing but I do think (ECB President Mario) Draghi's press conference will be dovish,"
Ten-year German bond yields hit a fresh six-week high of 1.824 percent in early trading before stabilising to stand flat 1.81 percent. Bunds were 14 ticks up at 140.52.
Other euro zone bonds were broadly rangebound.
Marc Ostwald, strategist, at Monument Securities said the ECB meeting is unlikely to give investors any new insight into the rates outlook.
"His central message will be: 'in the short term inflation is going to be very subdued, we still see it picking up to target in long run and we have plenty tools in toolbox that we can deploy but, given our forecast, we don't see any need to deploy them at the moment."
German yields had their biggest one day gain in three months on Wednesday as data showed U.S. private-sector hiring rose in November at the fastest clip in a year.
Only days before the government's key and much more comprehensive employment count is released on Friday, the data fueled speculation the Fed could begin trimming its bond-buying stimulus sooner than expected.
Auctions from France and Spain were expected to go well, according to one trader. France will sell 3-4 billion euros of bonds maturing in 2018, 2021 and 2027 later.
Spain is also poised to issue between 2.5 billion and 3.5 billion euros in bonds maturing in 2017 and 2018.
A decision by Moody's Investors Service on Wednesday to raise the outlook on Spain's government bond rating to stable from negative will provide a favorable backdrop for the auction.
Ten-year Spanish bond yields were 2.4 basis points lower at 4.17 percent and the French equivalent was 1.8 bps lower at 2.20 percent.