UPDATE 1-German bond yields jump after ECB's Coeure warns on inflation risks

(Rewrites throughout)

LONDON, Jan 26 (Reuters) - German two-year bond yields rose to their highest level in almost seven months while five-year yields hit two-year highs on Friday, after the ECB's Benoit Coeure said he saw some complacency in financial markets towards inflation risks.

The comments from the ECB board member came a day after the European Central Bank surprised markets by striking a modestly dovish tone in the face of a robust euro, sparking a sell off across euro zone debt markets.

The 2-year Schatz yield rose to minus 0.548 percent , up around 2.5 basis points on the day.

Five-year German bond yields hit their highest level in over two years at minus 0.033 percent -- taking them within sight of zero percent.

"In general, the fact that Coeure sounded optimistic on growth and inflation on a global level may be pushing yields a little further up today after the European Central Bank meeting yesterday," said Mizuho strategist Antoine Bouvet.

German long-dated yields meanwhile were set for their six straight week of rises, their longest run of weekly rises since 2010, according to Reuters data.

The ECB decided on Thursday to keep policy on hold as inflation pressure remains muted but argued that its confidence has strengthened that inflation would rise back to its target of just below 2 percent.

The bank's Survey of Professional Forecasters showed on Friday that euro zone inflation could be faster in the coming years while long-term projections remain steady.

Most 10-year euro zone bond yields were up 1-3 basis points on the day, with Germany's Bund yield heading back towards a six-month high of 0.579 percent hit on Thursday.

"Given the strengthening of the economic data, a lot of investors are inclined to think that purchases of new securities will stop at the end of September," said Mark Dowding, a portfolio manager at BlueBay Asset Management.

"I think that is largely discounted and the debate is moving towards what is the timing of the first rate hike and what will be the trajectory of rates after that."

The German government bond yield curve was at its flattest in almost six weeks, as the 30-year Bund yield fell to 2-1/2 week low at 1.257 pct, down 5 bps on day.

Germany was also in focus on Friday, as a new round of negotiations for a coalition government began, which could contribute to added demand for safe haven assets. Italy is expected to sell up to 1.75 billion euros of bonds later in the day.

(Reporting by Dhara Ranasinghe & Fanny Pokin; Additional reporting by Abhinav Ramnarayan; Editing by Toby Chopra)