(Adds quote, PMI readings, updates prices)
LONDON, Nov 4 (Reuters) - Long-dated euro zone bond yields edged higher on Thursday with the market predicting that the Bank of England will be the first major central bank to hike rates since the onset of the COVID-19 crisis when it meets later in the day.
Following the U.S. Federal Reserve&'s announcement overnight that it would taper its bond purchases, money markets are predicting that the BoE will hike rates on Thursday as policymakers around the world grapple with runaway inflation.
"Spill-overs from the BoE decision should be in store today for Bunds with the market pricing a 15bp hike of the base rate at today&'s meeting, followed by more aggressive tightening throughout 2022," analysts at Commerzbank said in a note, adding they too expect a 15 basis point hike.
Long-dated bonds are seen as most sensitive to rate rises, and Germany&'s 30-year Bund yield, the benchmark for the bloc, rose 2 basis points to 0.17%.
Other high-grade long-dated euro zone bond yields were also up 1-2 basis points at the open.,
British 10-year borrowing costs, which have doubled since mid-August, were a basis point lower at 1.04%.
Central banks have been grappling with how to deal with high inflation readings from around the world when the global economy is still recovering from the COVID-19 crisis.
ECB chief Christine Lagarde said last week that the bank&'s last meeting was about "inflation, inflation, inflation". Subsequently, yields across the bloc rose to their highest levels in months.
On Wednesday, Lagarde moved to calm markets by saying rate hikes were unlikely in 2022, and this has anchored yields to an extent across the bloc.
As a result, shorter-dated bond yields were down for a second session in a row, with Germany&'s 10-year yield lower a basis point at -0.177%. Italy&'s 10-year bond yield was down 2 bps and heading towards the 1% mark again after spiking as high as 1.289% on Monday.
That said, Germany&'s 10-year government bond yields, at -0.17%, are more than 30 bps higher than where they were in August.
Also pushing yields lower was the euro zone purchasing managers index (PMI) business survey, which fell to a six-month low in October.
Supply chain bottlenecks and logistical issues related to the COVID-19 pandemic pushed input prices to rise at the fastest rate in over two decades, the survey showed. (Reporting by Abhinav Ramnarayan; editing by Barbara Lewis and Giles Elgood)