German bond yields rise to five-week high as U.S. yields jump on Georgia count

* Euro zone periphery govt bond yields

LONDON, Jan 6 (Reuters) - Germany’s 10-year bond yields rose to their highest in almost five weeks on Wednesday, pushed up by a jump in U.S. Treasury yields, on expectations that a win for Democrats in a Senate runoff race in Georgia may signal more fiscal spending.

Democratic challenger Raphael Warnock won a hotly contested U.S. Senate race in Georgia over Republican incumbent Kelly Loeffler, TV networks and Edison Research projected. A second runoff remains undecided, leaving control of the Senate up in the air.

Democrats must win both contests to take control of the Senate, lifting the prospect of more fiscal stimulus and inflation -- a scenario that bond markets appeared to betting on.

As the U.S. 10-year Treasury yield rose above 1% for the first time since March, with the yield curve at its steepest since 2017, Europe’s borrowing headed higher in early trade.

In Germany, the euro area’s benchmark issuer, 10-year bond yields rose to -0.53% -- their highest in almost five weeks.

Most 10-year year bond yields across the euro zone were up around 4 to 5 basis points on the day. UK gilt yields touched a two-week high, a sign of the broader trend in world bond markets.

“If market expectations of a double Democrat win in Georgia are confirmed, gains above 1% should be maintained,” analysts at ING said, referring to the 10-year U.S. Treasury yield. “But it will feel more palatable later in Q1 when the worst of the Covid impact is behind us.”

Bond strategists said the reflation trade evident in U.S. bond markets would probably be less pronounced in the euro area, where inflation was likely to be further depressed by weak economic activity, given renewed restrictions to contain the coronavirus.

Reporting by Dhara Ranasinghe, editing by Larry King