Euro zone bond yields rose on Tuesday, with all eyes on the U.S. election which could drive significant volatility across global bond markets, as well as other asset classes.

Germany's 10-year bond yield, the benchmark for the euro zone bloc, rose 4 basis points to 2.43%, closing in on last week's three-month high of 2.447%.

The German 2-year yield rose 2 bps to 2.31%.

Euro zone bond markets will close well before voting concludes in Tuesday's U.S. presidential election, but there are potentially sharp swings to come when trading begins on Wednesday.

The MOVE index which tracks expected volatility in U.S. Treasuries is at its highest in a year, a sign, say analysts at ING, that "we can expect a lot more rates volatility once the election outcome becomes clear".

Euro zone bonds have reacted to moves in the U.S. Treasury market in recent months so will also be affected.

Opinion polls show the election race as virtually even and the winner may not be known for days, though Republican candidate former President Donald Trump has already signalled that he will attempt to fight any defeat, as he did in 2020.

The benchmark U.S. 10-year Treasury yield was little changed at 4.31%.

Market consensus ahead of the election is that a Trump victory will lead to higher Treasury yields due to his policies pushing inflation and growth higher likely causing a slower pace of rate cuts from the Federal Reserve.

The picture in Europe is more complicated however.

On the one hand, euro zone bonds have moved broadly in line with their U.S. equivalents this year, but, on the other, if Trump were to impose the heavy tariffs he has threatened on Europe, it could hurt economic growth and push the European Central Bank to accelerate rate cuts, sending yields lower.

"For euro rates, we could see a broader risk-off move dominating in the case of a Trump win, with flows towards (German) Bunds and longer-duration bonds as a result," said the ING analysts.

Politics in Germany, where the ruling three way coalition faces a make-or-break week, is also complicating the picture for markets, as is a rise in oil prices with Brent at a 10-day high back above $75 a barrel.

Italy's 10-year bond yield, seen as the benchmark for the European periphery, was 5 basis points higher at 3.71%, leaving the gap between Italian and German 10-year yields at 127 bps.

(Reporting by Alun John; Editing by Kirsten Donovan)