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UPDATE 3-Bund yields rise as German inflation exceeds ECB target again

* German inflation hits 2.1% for June

* Bund yields rise near recent one-month highs

* EU to raise 15 bln euros from second bond sale

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Updates prices)

LONDON, June 29 (Reuters) - German government bond yields rose on Tuesday after Europe’s largest economy recorded inflation above the European Central Bank’s target for the bloc for the second month running.

Germany’s annual consumer price inflation eased to 2.1% on a harmonised basis in June from 2.4% in May but was still above the European Central Bank’s target of close to but below 2%, the Federal Statistics Office said on Tuesday.

Investors have been keeping an eye on inflation figures and what they may mean for continued central bank stimulus.

“The latest drop in German headline inflation masks another surge that we think is around the corner, adding to an increasingly heated debate at the ECB about potential next steps towards tapering,” said ING economist Carsten Brzeski.

Germany’s 10-year government bond yield was up 1 basis point at -0.173%, within sight of a recent one-month high of -0.146%.

Other euro zone bond yields were flat to slightly higher on the day. French 10-year bond yields, which fell sharply after far-right politician Marine Le Pen fared badly in regional elections over the weekend, were up 1 basis point at 0.168%.

The rise is relatively subdued as euro zone policymakers have been at pains to show they will not act immediately on any spikes in inflation they see as transitory or led by oil prices, analysts say.

Yet German 10-year yields have risen around 40 basis points this year, suggesting that each inflation figure is pointing towards a larger rebound and an eventual clawing back of stimulus.

Later on Tuesday the European Union is set to raise 15 billion euros ($17.84 billion) from its second issuance under the Next Generation EU (NGEU) programme through the sale of five-year and 30-year bonds. ($1 = 0.8404 euro)

Reporting by Abhinav Ramnarayan, additional reporting by Elizabeth Howcroft; Editing by David Goodman, Steve Orlofsky and Jonathan Oatis

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