UPDATE 2-Euro zone yields rise as U.S. Treasury yields jump back after rally

* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr (Updates prices, adds background)

By Yoruk Bahceli

AMSTERDAM, April 16 (Reuters) - Euro zone bond yields rose on Friday following an overnight jump in U.S. Treasury yields after a hefty rally a day earlier.

U.S. Treasury yields dived to one-month lows on Thursday as a possible safe-haven bid related to increased U.S.-Russia tensions, along with Japanese buying and technical factors, helped overshadow better-than-expected economic data.

Benchmark 10-year U.S. Treasury yields, which fell more than 10 basis points on Thursday, undid much of that move and were up 6 bps in early European trade.

Euro zone bond yields also started the day higher, with Germany's 10-year yield, the benchmark for the region, up 3 basis points to -0.26%.

"I'm not surprised to see a pull-back," said Peter McCallum, rates strategist at Mizuho, of Friday's market moves.

McCallum said it was natural to see some pull-back from the fall in yields seen on Thursday, which he said took place for largely technical reasons, given further expectations for economic data confirming a speedy U.S. economic recovery.

Safe-haven bond yields tend to rise on news deemed positive for the economy.

Data from the University of Michigan due at 1400 GMT is expected to show a pick-up in U.S. consumer sentiment.

Elsewhere, Italy late on Thursday cut its economic growth forecast for this year and said its budget deficit would surge to a 20-year high, taking into account a new 40 billion-euro stimulus package the Italian cabinet approved.

The news was largely expected and had no immediate impact on Italian government bonds.

Benchmark 10-year yields there were up 2 basis point to 0.75%, while the closely watched risk premium on top of German bonds was at 101 basis points.

A market gauge of long-term inflation expectations fell to 3-week low below 1.52%.

Still, the risk premium has risen in April, recently touching the highest since early March at 106 basis points, under pressure since the ratification of the European Union coronavirus recovery fund was thrown into doubt by the German constitutional court.

It could take at least a decade for Italy's debt-to-GDP ratio to return to its pre-COVID level of 135% credit rating agency Fitch said on Friday, and it will need a decade longer than expected to get it down to 100% even in an optimistic scenario.

The calculations were part of a report on the difficulty of developing a credible European Union debt rule for a highly indebted country.

On the data front, euro zone inflation accelerated in line with an initial estimate in March, delivering a 1.3% year-on-year increase. (Reporting by Yoruk Bahceli, editing by Angus MacSwan)