Euro zone government bond yields inch higher ahead of survey data

By Harry Robertson LONDON, Feb 21 (Reuters) - Euro zone government bond yields rose slightly on Tuesday as investors waited for survey data to give a sense of the health of the economy in February. The preliminary purchasing managers' index (PMI) survey for the euro zone is due to be released at 0900 GMT and is expected to show that business activity picked up for a second month running. Germany's 10-year yield , the benchmark for the single currency bloc, was up less than 1 basis point (bp) to 2.465% on Tuesday. The yield, which moves inversely to the price, hit a six-week high of 2.565% on Friday after European Central Bank (ECB) officials made it clear they are intent on continuing to raise interest rates. That was a whisker away from the 11-year high of 2.569% touched at the start of the year. Expectations of higher rates traditionally cause investors to demand a highe return on bonds, weighing on prices. Italy's 10-year yield was up 1 bp at 4.348%, but remained below the six-week high of 4.484% hit on Friday. The euro zone composite S&P Global PMI is expected to have risen to 50.6 in February, above the 50 mark which separates growth from contraction for the second month running. Investors will keep a close eye on what company managers say about inflation and wages in the survey. "I think a soft landing (for the economy) is probably the most likely but the thing that nags at me is that monetary policy acts with a lag," said Chris Iggo, chief investment officer for core investments at AXA Investment Managers. "We've seen quite a lot of tightening coming through globally. And so far the economic data has been quite resilient. But we've seen in past cycles that it does take some time." Germany's 2-year yield climbed 1 bp to 2.902%, having risen to a more than 14-year high of 2.943% at the end of last week. Italy's 2-year yield was up 2 bps to 3.468%. Yet it also remained below a more than 10-year high of 3.558% hit on Friday. Shorter-dated yields are highly sensitive to interest rate expectations, and have risen sharply over the last two weeks. "It's quiet," Iggo said. "It's the macro cycle, that's the thing to watch. For the moment market sentiment is better in terms of growth." <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Global business activity ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Harry Robertson, Editing by Louise Heavens)