(Updates at 1525 GMT)

By Harry Robertson and Samuel Indyk

LONDON, June 27 (Reuters) -

German government bond yields were little changed on

Thursday after rising to their highest levels in two weeks,

while the risk premium investors demand to hold French debt

widened to within striking distance of a seven-year high reached

two weeks ago.

France's 10-year bond yield rose to 3.278% in

early trading, the highest since June 11, and was last up 4 bps.

Germany's equivalent, the benchmark for the

euro zone, was last at 2.442%, having earlier touched 2.482% in

early trading, the highest since June 13. Yields move inversely

to prices.

That meant risk premium investors demand to hold French

debt widened, with the so-called spread between French and

German 10-year yields rising back above 81 bps,

close to the 82 bp level hit on June 14.

Attention remains on the French election, where Marine

Le Pen's National Rally (RN) continues to lead in

polls

, but looks likely to fall short of an absolute majority in

the National Assembly.

"Markets remain volatile ahead of this weekend's French

election," said Citigroup strategists in a note.

Worries about possible contagion have kept Italian bond

yields elevated. Italy's 10-year yield climbed to

4.044%, the highest since June 12.

Italian bonds' spread over their German peers

also rose, up to 157 bps. The spread hit its

widest since mid-February on June 14 at 159 bps as investors

bought German bonds.

Meanwhile investors were waiting for inflation data from

the United States and Europe for hints about future monetary

policy moves.

Stronger-than-expected inflation prints from Australia and

Canada this week have reminded markets that the battle against

price rises is ongoing.

U.S. personal consumption expenditure (PCE) inflation data

for May is due on Friday, and is likely to guide Federal Reserve

policy and have knock-on effects for other central banks.

Piet Haines Christiansen, chief strategist for fixed

income research at Danske Bank, said investors were also looking

towards next week, when euro zone inflation figures for May will

be released and the European Central Bank's annual Forum on

Central Banking will take place in Portugal.

France and Spain are among the countries to release

inflation data on Friday, ahead of the euro zone-wide number.