* Euro zone bonds higher on US sell-off, supply
* 10-year U.S. Treasury yield hits high of 2.61 pct
* France and Spain to hold auctions
* Austria seen launching 10-year bond syndication (Updates prices, adds new quotes & China and Japan)
LONDON, Jan 18 (Reuters) - Borrowing costs in the euro area edged towards recent multi-months highs on Thursday, as a sell-off in U.S. Treasuries and new supply from France, Spain and Austria put bond markets on the back foot once again.
The 10-year U.S. Treasury yield hit its highest since March 2017 at 2.61 percent in European trade, pushing euro zone counterparts higher.
Two-year Treasury yields hit a 10-year high on Thursday on expectations the Federal Reserve will continue to tighten monetary policy this year.
Analysts at Rabobank said speculation that Apple might offload U.S. Treasuries to pay for the $38 billion in taxes on the profits it intends to repatriate could also have weighed on U.S. bonds. Germany's 10-year bond yield, the benchmark for the region, was 2 bps higher on the day at 0.51 percent, near 5-1/2 months of 0.54 percent hit on Friday.
Most 10-year bond yields in the euro area were up 1-2 basis points on the day. "It's been Treasury driven ... though there was some relief in that the risk of a government shutdown has been pushed back to late February," said ING senior rates strategist Martin van Vliet.
Government bond yields across the world have been rising in recent times on signs of an uptick in the global economy and on signals that major central banks will tighten monetary policy.
On Thursday, there was further news on this front, China's economy growing faster than expected in the fourth quarter from a year earlier.
Borrowing costs across the euro zone had also been facing upward pressure from new supply.
Austria's 10-year syndicated bond drew over 15.2 billion euros in orders on Thursday, France sold 7.5 billion euros in short-dated bonds and Spain raised 4.1 billion euros in a bond auction.
Soon after the auction, the gap between Spanish and German 10-year government bond yields narrowed to 96 basis points, its tightest level since August 2017.
Analysts attributed the move to speculation over a potential ratings upgrade for Spain by Fitch Ratings.
Later on Thursday, European Central Bank rate-setter Benoît Coeuré and Bundesbank President Jens Weidmann are expected to speak in Frankfurt.
"Coeuré ... has not been heard year-to-date and could use the chance to stifle any remaining hawkish expectations ahead of next week's ECB meeting," van Vliet of ING said in a note.
Bond markets have taken comfort over the past week in signs that ECB rate-setters are in no hurry to commence an immediate change in the bank's policy stance.
On Wednesday, the ECB's Vitor Constancio said in an interview he did not rule out that monetary policy would remain "very accommodating for a long time."
That followed a Reuters source-based story on Tuesday that the ECB is unlikely to ditch a pledge to keep buying bonds at next week's meeting.
(Reporting by Fanny Potkin; Graphic by Dhara Ranasinghe; Editing by Catherine Evans)