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UPDATE 2-Policymakers talk euro bond yields up from five-week lows

* U.S. Treasury yields rise sharply, euro zone bonds follow

U.S.-German 10-year yield gap close to widest in four months

* Euro zone periphery govt bond yields - http://tmsnrt.rs/2ii2Bqr (Writes through)

By Dhara Ranasinghe and Abhinav Ramnarayan

LONDON, Oct 18 (Reuters) - Euro-area bond yields came off five-week lows on Wednesday, helped by a sharp rise in U.S. Treasury yields on intensifying rate hike expectations in the world's largest economy.

Earlier this week, euro zone bond yields had tumbled on the view that the European Central Bank (ECB), which meets next Thursday, would signal a prolonged scaling back of its monetary stimulus scheme.

But 10-year U.S. Treasury yields rose 4 basis points after New York Fed President William Dudley largely restated his confident take on the U.S. economy, arguing that the falling dollar and an unemployment rate that dipped last month to its lowest level since 2001 were reasons to keep tightening monetary policy.

Bond yields in the world's major economies often move in sympathy with one another as many investors switch between them.

Euro zone bond yields were 2-6 basis points higher across the curve. Germany's 10-year bond yields, the benchmark for the region, was 3 bps higher at 0.39 percent.

"The sell-off in euro zone bonds is U.S. Treasuries-related. There's lot of nervousness in that market," said Mizuho strategist Antoine Bouvet.

Apart from the immediate rate hike expectations, investors are also pricing in the possibility that U.S. President Donald Trump was favoring Stanford economist John Taylor to head the Federal Reserve, perceived as more hawkish than current Fed chair Janet Yellen.

"It sounds we are heading towards a more hawkish Fed than the one led by Yellen," said Bouvet.

The difference between 10-year bond yields in the United States and Germany is about 194 bps and close to its widest in four months.

In addition, euro zone rate-setters including ECB chief Mario Draghi spoke on Wednesday.

France's central bank governor Francois Villeroy de Galhau called on Wednesday for a reduction in ECB bond purchases towards "their possible end" in light of stronger inflation.

Easy monetary policy gives euro zone governments a window of opportunity to enact reforms, Draghi said.

While yields were higher across the board, Spain's 10-year government bond yield was particularly hit, rising 7 bps to 1.62 percent, with analysts attributing the move to the tensions between Madrid and wantaway region of Catalonia.

Spain appealed to Catalan leader Carles Puigdemont to "act sensibly" on Wednesday, 24 hours before a government deadline for the region to renounce a bid for independence.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.bi z / c m s / ? p a g e I d = l i v e m a r k e t s

(Reporting by Dhara Ranasinghe and Abhinav Ramnarayan,; Editing by David Goodman and Andrew Heavens)