UPDATE 2-German bond yields hit one-week high after Yellen rate signal
* Fed Chair says rate rise likely at an upcoming meeting
* U.S. and other benchmark bond yields rise, dollar firms
* French, Irish yields converge for first time since 2007
* Euro zone periphery bond yields tmsnrt.rs/2ii2Bqr (Recasts and writes through)
By John Geddie and Abhinav Ramnarayan
LONDON, Feb 14 Europe's benchmark German bond yield climbed to a one-week high on Tuesday after signals the Federal Reserve was preparing to raise U.S. interest rates.
Although Fed Chair Janet Yellen flagged considerable uncertainty over economic policy under President Donald Trump, she said the central bank is likely to need to raise interest rates at an upcoming meeting.
That pushed up U.S. and other global benchmark bond yields and strengthened the dollar, as traders started to price in a slightly higher chance of a move at the Fed's next meeting, on March 14-15.
"The general tone from the statement is pretty upbeat ... Markets were relatively relaxed about March, and perhaps it may just edge expectations slightly in that direction," said Victoria Clarke, an economist at Investec, adding that she expected the next increase in June.
U.S. job growth surged more than expected in January but wages barely rose, creating something of a mixed picture for the Fed as wage growth is one of the main drivers of inflation .
U.S. inflation and retail sales data for January are due on Wednesday.
POLITICS
In the euro zone, analysts said disappointing growth data and an uncertain political outlook should temper any further rise in bond yields.
Data on Tuesday showed the German economy, the euro zone's biggest, expanded 0.4 percent in the final quarter of 2016, slightly below expectations, tamping down inflation expectations .
German 10-year yields initially dipped slightly on Tuesday, but were some 4 basis points higher at a one-week high of 0.38 percent as markets prepared to close.
France - at the centre of Europe's political concerns, because far-right, eurosceptic Marine Le Pen is in contention for an upcoming presidential vote - saw its 10-year borrowing costs converge briefly with lower-rated Ireland for the first time since 2007.
France's credit ratings of Aa2, AA and AA from Moody's, S&P Global and Fitch are several notches above Ireland's A3, A+ and A.
Meanwhile, there appeared to be some comfort for investors in Italian bonds - where yields have shot to 19-month highs in recent weeks - after former Italian Prime Minister Matteo Renzi called for a leadership contest in his ruling Democratic Party that will probably delay snap elections.
Italy's 10-year yield was up slightly at 2.24 percent on Tuesday but rose less than German equivalents.
"This perpetuates the uncertain outlook for Italian politics, but the market now feels that elections will happen later rather than sooner and that's giving some comfort," said Rabobank strategist Richard McGuire.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Editing by Larry King)