Nov 7 (Reuters) - Euro zone borrowing costs edged higher on Monday on investor fears about inflation and fading hopes for a quick end to central banks' rate hiking cycle.
Analysts said potential upside surprises in consumer price data and expectations of increasing bond supply due to public spending to tackle the energy crisis would prop up German Bund yields.
Germany will spend 83.3 billion euros, or 42% of a major protection scheme launched last month, to finance a cap on gas and power prices in 2023, a draft proposal seen by Reuters showed.
Meanwhile, German industrial production grew in September, supporting the view that the European Central Bank (ECB) will keep raising rates aggressively.
Yields on 10-year Bunds were up 4 basis points (bps) at 2.33%. They hit an 11-year high at 2.53% on Oct. 21.
"In the euro area, macroeconomic data continue to surprise to the upside," George Buckley, an economist at Nomura, said in a research note.
"Subsequent ECB speakers put paid to the market's dovish interpretation of the October ECB meeting; numerous ECB Governing Council members came out saying there was much more to do on rates," he added.
France's central bank chief Francois Villeroy de Galhau told the Irish Times that the central bank must not stop raising interest rates until underlying inflation has peaked, but it may slow the pace of hikes once rates hit a level that starts to restrict growth.
Mixed U.S. jobs data released on Friday failed to provide proper relief for bond markets and dampened hopes of a quick end to the Federal Reserve's hiking cycle.
"The decent U.S. payroll gain on Friday left the door open for further bold rate hikes from the Fed," Commerzbank analysts said in a note to clients.
The crucial numbers for the week will be U.S. consumer prices while the euro area calendar is thin.
Italy's 10-year government bond yield rose 1.5 bps to 4.48%, with the spread between Italian and German 10-year yields at 214 bps. (Reporting by Stefano Rebaudo, editing by Emelia Sithole-Matarise)
