Euro area bonds track U.S. yields higher

Nov 14 (Reuters) - European government bonds yields edged up on Thursday, tracking U.S. Treasuries, as investors geared up for higher inflation over the longer term under a new Trump administration.

Benchmark 10-year yields hit a four-and-a-half-month high at 4.483% as U.S. President-elect Donald Trump's promises for cutting taxes, raising import tariffs and immigration are seen as widening budget deficits and putting upward pressure on inflation.

The euro zone counterpart, German 10-year bond yield , rose 2 basis point to 2.41%, while Italy's 10-year yield, the benchmark for the euro zone periphery, ticked up 1 bp to 3.64%.

"With little euro zone macro data to work with and Trump-related risks moving to the background for now, we expect the correlation with U.S. rates to remain strong," said Benjamin Schroeder, senior rates strategist at ING.

The threat of U.S. tariffs under the new Trump administration is adding to worries about a weak economic recovery in the euro area, bolstering the case for more rate cuts by the European Central Bank. A ZEW Institute survey this week indicated Trump's election victory and the collapse of the German government sapped investor morale in November.

Traders are currently fully pricing a quarter-point rate cut by the ECB in December, with about a 20% chance of a 50 bps reduction.

Germany's two-year bond yield, which is more sensitive to ECB rate expectations, was little changed at 2.153% after hitting a near three-week low of 2.097% on Tuesday.

After data showing a rise in U.S. consumer prices in October on Wednesday raised bets on a December U.S. interest rate cut, investors will look to producer prices data, another inflation gauge, as well as weekly jobless claims at 1330 GMT.

Investors will also eye euro zone third-quarter GDP at 1000 GMT. (Reporting by Medha Singh in Bengaluru; Editing by Angus MacSwan)